I do not know why, but when I sat down to write this column, the image of a medieval dining hall appeared, full of celebrants toasting the recent mergers and acquisitions that were ushering in a new order. In the annals of the British monarchy, people would have been proclaiming, "The King is dead. Long live the king!" Or to paraphrase it, "The old order is dead. Long live the new order!"

Hardly. Mark Lancaster, the CEO of SDL, once told me, "The shape of the industry is different now than it was five years ago, and it will be different five years from now."

So what has happened since the big acquisitions announced by Lionbridge and SDL?

Lionbridge. First, Lionbridge reported a record first quarter for 2005. Sales were US $41.3 and produced net revenue of US $1.4 million. Rory Cowan, Lionbridge’s CEO, noted, "The traction from our field sales force is finally beginning to show." Not surprisingly, since the company has the most sales people of any firm.

Lionbridge experienced a small share price bounce (to US $7.50) after acquiring BGS. As we go to press, shares are back down to US $6.65, but still well above the low point of US $3.87, recorded sometime within the last 52 months. The chat lines all say buy LIOX. The sale of BGS to Lionbridge officially closed on September 7, but Bowne remains the largest shareholder.

SDL. Meanwhile, SDL (which acquired TRADOS, but plans to keep its brand around for several years) announced its six-month sales (ending June 2005) of £34 million and profit before tax of £3.1 million. Its stock did better than Lion bridge’s after its big acquisition. SDL is now trading at 180 pence, compared to around at 120.

So, why did Lionbridge’s stock price stay flat, while SDL’s went up? Don DePalma of Common Sense Advisory supplied me with this answer: "SDL stock may be up because investors are buying the notion that SDL is a software vendor, rather than a service supplier. Once again we do the math – software vendors sell for multiples of revenue, while service vendors sell for a percentage of revenue."

Titan. A couple of lists have come out ranking the largest localization and translation firms in the world. And with annual translation sales of US $285 million, U.S. military defense contractor Titan ranks right up there between Lionbridge and SDL. The U.S. wars in the Middle East have been good for the language business. We have been trying to get details on how Titan does its work, but Marc Peltier, who runs Titan’s language operations, says that he can’t talk to us without obtaining all kinds of U.S. Army approvals.

Language Weaver. Also benefiting from wars and heightened security has been Language Weaver. But unlike Titan’s client, the U.S. Army, Language Weaver’s main source of capital is Q-Tel (the venture capital arm of the CIA). The latter, interestingly enough, has used every forum it can to laud Language Weaver. The company hopes to use this publicity to obtain more private sector clients.

Language Weaver helped itself in the private capital markets by being acknowledged in Deloitte’s Technology Fast 50 Program for the Los Angeles area. It received the Rising Star Award, which is a special designation for fast-growth technology companies that have been in business just three or four years.

Of all this, Language Weaver’s CEO, Bryce Benjamin, says, "We are truly blessed at Language Weaver with a team that gets their collective jollies from routinely exceeding customer expectations through techno excellence and on-time delivery. While the government market has been the primary beneficiary of our products and services in the last few years, 2006 should bring accelerating deployments in the commercial sector in a variety of applications for automatic translation."

In any event, Titan seems more of a "job shop," providing translators – rather than technology solutions – to the U.S. government. Not so another public company called CACI – it has become a reseller for Language Weaver. This is part of the latter’s strategy to get to “integrators around the Beltway (the Washington, D.C. area).”

CACI had earlier developed something on its own called DOCEX (Documentation Exploitation). According to CACI, it "improved the ability to organize, translate and analyze captured information in virtual all formats and many languages." The system provided the essence of a document’s contents to allow for quick prioritization.

In a recent PowerPoint presentation, CACI gave a good rundown on why you should and should not look at U.S. government business:

• Increased spending on national defense and intelligence
• Continued war on terrorism
• Continuing personnel shortage and aging employee base
• Government efficiency and modernization initiatives
• Increased levels of contracting by the Federal government
• High barriers to entry in the form of established and protected providers, putting them in a lead position for new business (so forget about opening that Washington, D.C. office!)

Systran. You would think that the last item would have assured Systran a better entry into this market, but being a French firm means that it doesn’t sell well in Washington these days (along with French wine …). Sales for the first semester were 4.5 million euros – down 22.2% from last year. Operating income was 1.4 million euros.

Systran has changed its emphasis to software publishing, which now represents 73% of sales, as compared to 45% last year. According to Systran, "The company anticipates an increase in the sales of software licenses during the second half of 2005, as it continues to reinforce its sales and marketing teams."

The Money Game: Mergers and Acquisitions/Venture Capital

Money is out there, as quarter 3 M&A activity increased 23%. IT companies are looking to buy as much intellectual property as possible to gain an edge over their competitors.

Venture capitalists, in turn, invested US $5.75 billion in the third quarter, with the median deal coming in at US $8 million. Following pharmaceutical sector, communications, software and wireless firms attracted the most deals. So, how did our private firms do?

Welocalize closed record sales of US $10.2 million in the first half of 2005. This represents the 14th consecutive quarter of growth in sales and puts it among the top 20 in worldwide sales. It has also been recognized by the Deloitte Fast 50 in its region.

Transware, which acquired GlobalSight, underwent management changes as its venture capital-appointed CEO left. We knew that that CEO would be lost in such a small company. Transware’s production center is still in Ireland, but I am told that thirty sales people are still in the U.S.

Translations.com. A unique selling proposition of this company has become the fact that the employees own the firm, they are not going to sell and they are happy.

Logos. As is our habit, we went on-line to gather news and numbers for the leading firms in the localization business. So, we were excited when we discovered that Logos of Italy had a new section entitled, Statistics. However, this turned out not to be about financials, but rather about everything you ever wanted to know concerning the where and when about Logos’ own web site visitors.

For example, the Logos site received 1,157 visits on September 1, and 76 % (most of which were from the U.S.) lasted less than a minute. This page even showed the search engine that the visitors were using (MSN led the way). I have never seen a rundown like this shown publicly, and given that Logos is one of the 20 largest firms worldwide in terms of sales in this industry, maybe it will provide some guidance to others on how to increase sales.

Logos has made no big move to get into the market where most of its web hits originated. Maybe they are looking at what happened to the RWS Group, which is now clear of any office in the U.S. ENLASO (the former RWS Group in the U.S.) now belongs to a management group in Boulder. By one estimate, RWS spent upwards of US $20 million to get into the U.S. market before deciding to concentrate on what it already had in Europe. It remains one of the world’s largest patent translation firms. Jonckers Translation and Engineering also pulled out of the U.S., but this just meant getting rid of one salesperson.

Star Group. "Even when others are tying the knot, Star prefers to stay single," according to Star Group CEO, Josef Zibung. He notes, "We can afford to reflect upon the shakeup in the industry – not only with a shrug of our shoulders, but also with a twinkle in our eye. For is it not a merger of competitors which once again results in Star – the biggest unlisted company in this sector – moving up another rung on the ladder?"

And Zibung takes issue with many of the forecasts and statements made by his competitors. Of Lionbridge he comments, "Lionbridge is today investing significant capital in this acquisition and will in the future be forced to plough in yet further resources in order to carry through the process of integration, a process which is known to be difficult in such cases. It will be revealing how the stock market reacts to this move and what results of it in the long term."

On the TRADOS-SDL merger, Zibung observes that the SDL and TRADOS estimates of their market size "are worthless and are done for marketing purposes." He states that either TRADOS or SDLX will disappear from the market, but hopes that people "migrate their translation memories or terminology to the time-tested and reliable Star Transit Line."

TippingSprung. Last, but certainly not least. Ever wonder what happens to the people whose companies get bought by Lionbridge or one of the other big firms in our business? I ran into Robert Sprung the other day. Remember him? For years, Robert ran Harvard Translations and, as he points out, built it into a $6 million a year operation with no debt or outside investors. He was also editor of Language International for four years. Robert now runs TippingSprung, which concentrates on branding and globalization issues, and offers language services in that regard.

---

John Freivalds is Managing Director of JFA Marketing and publisher of The Periodic Tables (Languages, Money, First Class and Toasts). He can be reached at jfa@direcway.com.