It’s early 2006 and the world is rife with predictions, but when I made some two years ago for another newsletter, they proved 100% inaccurate. So, this year I will predict nothing and let the money talk for itself as the year wears on. Last year I predicted that a Chinese firm would make a U.S. or European acquisition. Although 23 Chinese firms contacted me during the year, none appeared large enough to buy into a “Western” operation.

Luckily, several of our industry gurus were not so reticent. John Yunker of Bytelevel predicts that Lionbridge will acquire yet another company including targets “like Welocalize, Simultrans, McElroy, Luz, Translations.com, Foreign Exchange and Vistatec. The rumor mill points towards Welocalize (read more about Welocalize later in this column).

Overcoming the Digital Divide in Iraq

Already controversial, U.S. government spending on translation took an even more controversial turn when it was revealed that the National Security Agency, the super secret spying agency, was monitoring phone calls within the U.S. Given that the FBI already had a backlog of untranslated wiretaps, no indication was given of how this new spying raw material was to be translated. All this has helped Language Weaver’s standing, since it offers technology to handle all the untranslated material that comes in.

Then we found out that the few translators who did exist were translating “canned” stories written by the U.S. military for placement in Iraqi newspapers. What is this worth? The Lincoln Group, which manages this information – or misinformation – effort, depending on your point of view, will potentially receive US $300 million over the next five years.

In case you are not making enough money where you are working, the Lincoln Group is seeking an experienced project director “to manage a variety of Information Operations and Communications campaigns which will target audiences in support of Special Operations Command.” To overcome the digital divide to get your message across, one of the notable projects undertaken by the Lincoln Group has been “to design and produce tens of thousands of water bottles with custom messages in Arabic….These messages, written on the labels of the water bottles, promote friendly discourse with the U.S. and encourage religious pilgrims to call a phone number imprinted on the bottle in the event they notice insurgents or criminal activity in their area.” Hey, as Marshall McLuhan wrote, the “medium is the message.” But as we go to press, we do not yet know whether the water is carbonated or uncarbonated.

I suppose the positive aspect of all this language spending is the recognition that you have to communicate in the language of the people that you hope to affect. I have particular interest in all this as my father worked for the Voice of America, broadcasting to Latvia during the Soviet years. I know what he did and the standards he had, and I still hear from people in Latvia what the impact of those broadcasts was. My father’s boss at the time was the noted journalist Edward R. Murrow, who is the focus of the hit movie Good Night and Good Luck. The Latvian Service won an award for being the best of the 38 languages offered by the “Voice.” So I know how to compare the multilingual propaganda efforts being developed now.

As we go to press, Northrop Grumman and the L3 Corporation (which bought Titan Corporation – read Challenging the Titan and Winning the War of Words, Part 2) are awaiting word whether they have won their joint bid for the U.S. Army’s Interpreter and Translator Management Services (ITMS) contract. The ITMS “will support the global war on terror and U.S. military operations worldwide.” This contract is to be announced in January and could be worth US $2.6 billion over five years. If Northrop Grumman (which also builds fighter aircraft) wins this contract, it will become the largest language service provider in the world in terms of sales.

Once again what’s important in the U.S. Defense game is to be an “integrator.” That’s the chief qualification for getting work from the U.S. military – not whether you have any intrinsic expertise. Language Weaver has already figured that out by going to integrators rather than directly to the contracting agency to have their software used by the military. So if you’re thinking of pursuing this market, find an integrator to work with. And what does C. Bryce Benjamin, Language Weaver’s CEO, predict for 2006? “I think it’s going to be another good year for Language Weaver.”

In the same way that Systran and Language Weaver have benefited from the U.S. government investing in their technology during times of conflict, so too has a new company that has come to our attention. Integrated Wave Technologies has developed a “tactical, eyes free, hands free voice to voice translation device.” Applications include providing instruction during force protection, house surveillance, combat patrol and civil aid missions.

Money in the Branding Game

Corporate branding is big business and results in a lot of translation and localization work as companies’ missions and approaches (their verbal identity) have to be redefined in a variety of languages. In the last few weeks, AT&T, Intel and Yellow Roadway (set to become YRC Worldwide), announced their expansion into China. Localization and translation firms in that specialty should be doing very well.

A Chinese court has sided with Starbucks Corporation in its battle over the use of its Chinese name. The dispute in China’s booming consumer market highlights the country’s struggle to mediate trademark disputes. A Shanghai Court ordered Shanghai Xing bake to stop using the name “Xing bake,” as this is the name used in China by Starbucks. Xing (pronounced shing)means star in Chinese and bake or bah kuh sounds like bucks. Shanghai Xing bake was ordered to pay Starbucks a fine of 500,000 Yuan (US $62,000).

And for the multilingual naming news involving money that you have all been waiting to hear … Latvia’s Cabinet of Ministers decided on January 3 that the Euro should be spelled Eiro in Latvian. Latvia maintains that spelling conventions adopted by the EU refer to a language and is up to every member state. Therefore, Latvia has the right to adopt a different spelling of the currency. The Finance Ministry also emphasizes that historic reasons need to be taken into consideration. Latvian was approved as the only state language to be compensated for the damage done by Russification during the Soviet era. And for you linguists out there, since there is no diphthong eu in Latvian, the EU single currency cannot be spelled euro in Latvian. So there you have it, the world’s first diphthong defense of a language term!

Public Companies

One of the biggest companies involved in the language game is Siemens, the German conglomerate based in Munich. In 2005, it had sales of 75 billion euros and a net income of 3.1 billion. In 2004, they made an in-house language group (LS Language Services GmbH) a wholly owned subsidiary, which Siemens then hoped to sell off. (It has been the announced goal of Seimens Chairman Klaus Kleinfeld to sell of all its non-core assets.) LS Language Services sells 76% of its service to Siemens and the rest to a variety of customers. They do about 9 million euros a year. Along with Lucent, Canon, HP and Xerox, they remain one of the few companies with an in-house localization group.

But not for long, according to one authority who says that, in a couple of months, the group will either be disbanded or sold off.. The latter will be difficult as its core 23 employees are covered by German law and currently earn more than 40% than their U.S. peers. Any company that buys them will immediately have to deal with that situation. The company is profitable, but the employees will probably be better off accepting termination benefits than going with a new buyer who will have to bring Siemens wages in line with their own.

First, Lionbridge announces third quarter 2005 results with record revenue of US $58.4,” read the press release. A significant point was that there was 10% organic growth over the previous year. Of perhaps greater investor interest was that Bowne, which acquired 9.4 million Lionbridge shares when it sold Bowne Global Solutions (BGS), put its shares on the market. At the time of the BGS sale, it had said it was going to hold on to its shares. Nonetheless, the share offering, which was priced at US $6.25 a share, shot up by 9.5% to US $7.05.

SDL shares have been steadily advancing, and as we go to press, are around 240 pence. SDL also announced that its stock was promoted to the FTSE All-Share Index. Organizations in this index benefit from increased trading volumes and inclusion in tracker funds. With this promotion, SDL anticipates increased press and analyst interest.

Private Companies

The headline in the New York Times Sunday Money Section on December 25, 2005 seems to set the tone for this section: Too big? Too small? Midsize seems just right.

I sense no despair among mid-size firms as to what their future will be, given their consolidation. Welocalize in the U.S. and Connect Global Solutions in Ireland have agreed to merge. (Read the mini-interview with Smith Yewell in this issue’s editorial.) Using Welocalize’s words, “This marks a major milestone in the rapidly evolving mid-tier of the globalization services industry. Steady consosolidation in the industry since the late 1990’s has left the mid-tier of the industry largely vacant, and the top tier of the industry is dominated by just one company. This merger creates a reliable, stable alternative offering in terms of both scalability and personalized attention to a client’s needs.”

According to E.Yewell Smith, the President and CEO of Welocalize, the key benefits of the merger include no reductions in staff, increased scale, with over US $20 million in revenue, 100 employees, and global reach with five offices in four countries (the U.S., Ireland, Germany and Japan).

Smith and Eugene McGinty, Managing Director of Connect Global Solutions, spent the last 15 months working on the merger to assure there was some chemistry between the two firms. “Both companies are passionate about delivering high quality localization services to our clients,” noted McGinty. “Given the alignments of our visions, technologies and overall strategies, the combination of our two companies will be highly beneficial to our customers worldwide.”

What Welocalize hopes to avoid is what happened to Transware after it acquired GlobalSight. When the merger took place, Transware brought in a new CEO and transferred its main office from Ireland to Silicon Valley. “He was never there!” is how a former employee described the tenure of that CEO, who had been an “entrepreneur in residence” of the venture capital firm with a large investment in Transware.

That first CEO is now gone, and Transware recently announced that it “made redundant” 21 of its 30 U.S. employees and 20 of its 80 Irish employees. In fact, it laid off all the employees involved in the GlobalSight purchase. So you have to wonder what Transware bought if it got rid of the “tribal knowledge” that the Global Sight people had about their product. I went back to look at the press release involving the GlobalSight acquisition and nowhere did it mention the value of GlobalSight’s employees – merely that it was buying their “globalization software.”

Angel Investors

Just about every company we have ever written about has had an angel investor (An individual who provides capital to one or more start-up companies. Such investments are characterized by high levels of risk and potentially large return on their investment. Source: investor words.com.) We have ignored this source of money for building localization and translation business, as it is seldom publicized. Accordingly, I went out to a couple of people who I know who have dealt with angel investors to ask for their opinions and insights.

Charlene Nagy of NCS Enterprises LLC, a translation company, started her firm on her own but realized that she needed capital to grow. She went to an “angel investor,” who turned out to be a long-time college friend looking to invest his capital but not worried about a loss in the beginning. Charlene reports that the arrangement has worked because her friend “knew I knew the business, and was good at what I did, and let me do it.He never questioned software purchases, computer upgrades, personnel hiring, or any of the day-to-day operations….I, on the other hand, let him do what he does best. He is solely responsible for all money aspects of the business – payroll, taxes, additional credit lines, benefits and IRA plans for employees.”

To gain another perspective, we contacted Lyra Spratt-Manning, formerly CEO of RWS and ENLASO and now on LISA’s Advisory Board. She offered the following advice for those seeking angel investors.

• Carefully research potential partners’ past affiliations and their business successes and failures.
• Avoid partners who are unfamiliar with your business sector.
• Avoid any funding from any partner’s relatives.
• If you do not avoid (2) above, then it is imperative that you not provide personal or corporate guarantees for funding.
• Maintain complete independence in your selection of legal counsel. All parties should forego past legal affiliations and select an independent counsel for the new entity.
• If trouble appears within the business relationship (e.g., major philosophy differences, lack of work ethic, etc.) seek legal remedy immediately. The longer you wait, the more damage there will be to the company morale and profits.
• Carefully select your advisory board or board of directors. Your prime criteria should be (1) knowledge of your industry and (2) no past personal relationships with any investors or officers.

Lyra notes that if you follow this advice, “you won’t get too depressed, and you will avoid drinking too much.”

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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.