War of the Words

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Global Watchtower

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War of the Words

Posted by Donald A. DePalma on August 1, 2006 in the following blogs: Translation and Localization, Web Globalization, Business Globalization, Technology, Interpreting, Market Data, Global Marketing, Best Practices, Supplier Business Issues
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Two weeks later Lionbridge announced record results. Within 30 minutes SDL said that sales of its server technologies grew by 230%. What we are seeing is a fight for "air supremacy" in the War of the Words.

Since it acquired Trados a year ago, SDL claims 41% growth in software-related revenues (a 33% growth in units) with over 50% of software sales coming from new customers. But SDL's press release also highlights the fact that "Sales in server technologies -- that utilize web architectures accessing centralized translation assets -- have grown by over 230%."

We started to wonder: Is SDL's phrase "web architectures accessing centralized translation assets" its spin on Lionbridge's "Web-architected Translation Memory"? Perhaps. When SDL wrote that its software "already manages billions of words through hosted deployments" it was trumping Lionbridge's earlier claim of "total capacity now approaching 1 billion total words under management." During its August 1st earnings call, Chairman Rory Cowan updated and clarified the count, stating that Lionbridge crossed the billion-word threshold with just 20% of its work ported to the new platform, and that he expected to have 40% on Logoport by the end of 2006. How about using the slogan "billions and billions served"? Wait, that's already taken.

But does the lingo train run in both directions between Waltham and Maidenhead? Looking for more evidence, we found the first SDL reference to anther buzzword du jour in its August 1st release: "As we move into 2007, SDL will continue to deliver software as a service technology." Lionbridge built the Software as a Service (SaaS) label into its April 2006 Freeway announcement. But we can find no evidence of Lionbridge using SDL's "Global Information Management" (GIM). Given the historical use of this noun phrase outside of SDL to mean IT management in global environments, that may change. After all, Lionbridge does have enterprise IT customers buying application development and testing services. And everybody loves a good TLA (three-letter acronym).

While Lionbridge seems to be winning this year's battle for the hearts and minds of the press corps with SDL, both companies show valid results for top-line and bottom-line business growth, whether or not "software as a service," GIM, and "Web-architected TM? are labels that stick. So here is a quick look under the headlines:

SDL trumpets its "150 enterprise GIM solutions" and over 130,000 software licenses. No one else comes close, so these numbers are indeed noteworthy. The company expects to report revenues of ?45 million, up 32% from 2005 (?34 million) and profits of ?5.0 million, before certain charges, up 43% from 2005 (?3.5 million).

Lionbridge claimed record revenues of US$110.5 million for Q2. Its 60 new customers made for a total of 486 this quarter, a net of 11 higher than last quarter. Of these, 13 bought at an annualized run rate over US$1 million per year, while 207 were bringing in US$50,000 per year or more. Lionbridge gross margin (GM) was up 30 basis points to 34.9% -- lower than SDL but moving in the right direction -- and expects to raise GM a further 100 basis points (in other words, by 1%) over the next year. We have to assume that Lionbridge execs were disappointed by such a modest improvement, and hence the "woe is me" explanation during the earnings call about how interpretation is such a low-margin, drag-down-the-entire-company kind of business.

To us, the most compelling metric out of Lionbridge did not even make the press release. Cowan said (again during the earnings call) that on a "pro forma" basis for the combined companies, Lionbridge/BGS showed 10% revenue growth after less than a year of combined operations -- in line with BGS CEO Jim Fagan's May 2005 prediction that the industry would grow at that rate.

Why do we think this revenue growth is so significant? A year into post-integration for any of the major Bowne Global acquisitions, revenues typically decreased by 10% -- and in many cases by more than that. Lionbridge has apparently maneuvered past the Scylla and Charybdis of post-acquisition confusion. But the company also had the favorable tail-wind of a positive economic environment for U.S. exporters this time.

Finally, was Cowan waxing poetic when he said the translation industry is a "prosaic" business? At first we heard "prozaic" (as in Prozac?), but given the testosterone level pulsing through the War of the Words, localization appears to be losing its sleepy, depressed, lackadaisical, homespun habits after all.

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