Software AG can spend 1-1.5 billion euros on acquisitions: CEO

By Douglas Busvine

FRANKFURT (Reuters) - German business software firm Software AG can spend 1-1.5 billion euros ($1.15 billion-$1.73 billion) on acquisitions, CEO Sanjay Brahmawar told Reuters on Thursday, as he seeks to drive growth in data integration and the industrial internet.

Brahmawar, a former IBM executive who was hired last year, has launched a strategy overhaul and plans 20-30 million in net new investments this year to revitalize the 50-year-old company based in the western German city of Darmstadt.

Earlier, Software AG reported a 1 percent decline in fourth-quarter revenues and flat operating profits, and guided towards weaker margins this year, sending its shares down by 7.9 percent. Sector sentiment was hit after Microsoft reported weaker cloud computing growth overnight.

Software AG is revamping its middleware division to focus on integrating data applications - whether they are on a cloud server or on devices at the 'edge' of networks - and strengthening its Cumulocity platform that can manage automated industrial production.

Brahmawar's strategy overhaul seeks to capitalize on the trend for companies to digitalize their operations. Although growth will mainly be organically driven, Brahmawar wants to boost that with "disciplined" acquisitions.

"We can raise 1 billion to 1.5 billion euros against our free cash flow," Brahmawar said in an interview. He said he was actively looking at takeover candidates, but "it's got to be the right opportunity".

He ruled out staff cuts after larger rival SAP said this week it would let go of more than 4 percent of its workforce as it seeks to accelerate its transition from running software on site to cloud-based servers.

Brahmawar has overhauled top management and is focusing marketing efforts on North America, Germany, Britain and France, as well as Japan and China in the Asia-Pacific region.

Software AG set 2019 guidance for operating margins of 28-30 percent, compared with 31.5 percent in 2018 as a whole.

Its digital business platform division was forecast to achieve growth of 3-7 percent this year; the newly formed IoT division was seen surging by 75-125 percent; while its Adabas & Natural database line would shrink by up to 5 percent.

Software AG will brief investors on its strategy overhaul at a capital markets day in London on Feb. 5.

(Reporting by Douglas Busvine, Editing by Sherry Jacob-Phillips; Editing by Michelle Martin)