Financial Objectives

The company’s long-term strategy

At the beginning of 2005, Telelogic set its vision to increase sales by a factor of five during the five-year period between 2005 and 2010 (5X5Yvision). This vision was based upon an analysis anticipating increased sales volume that would enable both high and enduring profitability.

Telelogic has strengthened its portfolio of products and its market position as a result of the acquisition of I-Logix in 2006 and both Popkin Software and Focal Point in 2005. Up until now, all three of the acquisitions have shown good development and their products have had an average pro-forma growth of 23% for the full year 2006 and 31% for the fourth quarter compared to corresponding periods last year. All three acquisitions have also exceeded Telelogic’s long-term required return.

The vision to multiply sales manifold remains. However, one pre-requisite to achieving this vision is that Telelogic identifies additional acquisition targets that have a good fit with the Telelogic strategy and that can be acquired for a reasonable price. However, Telelogic has absolutely no intentions to lower its demands for acquisition in order to, at all costs, achieve a five-fold growth in sales within the five-year period. Good business decisions and shareholder value come before trying to achieve the vision for growth within the specified timeframe..

Goal fulfillment in 2007

Telelogic had forecast that earnings per share for the full year 2007 would increase by at least 25%. Earnings per share amounted to SEK 0.43 for the fourth quarter, which is an improvement of SEK 0.13, or 43%, compared with the same period the year before. Earnings per share for the year as a whole totaled SEK 0.94, which is an improvement of SEK 0.29, or 45%. We thus achieved our earnings goal.

The operating margin for the fourth quarter was 27.5%, and 18.0% for the full year. This represents an improvement of four percentage points compared to 2006. Pre-tax profit in the fourth quarter improved by 42%, totaling MSEK 139.3. Earnings for the quarter were encumbered by MSEK 3.8 in costs related to the tender offer from IBM and (in compliance with IFRS) MSEK 3.3 for amortization of intangible assets related to acquisitions made in 2005 and 2006. Income after tax improved by 44% to MSEK 105.2.

Telelogic’s pre-tax profit for 2007 improved 48%, which corresponds to MSEK 309.9. Income after tax rose 45% to MSEK 232.4.

Outlook for 2008

Underlying demand in the market is expected to continue to be good, with similar quarterly fluctuations as in previous years.

For the full year 2008 Telelogic expects revenues to increase 7-12% in local currency and earnings per share to increase slightly more than that. Therefore Telelogic’s goal is for earnings to exceed SEK 1 per share.