UPDATE:SDL Buys Automatic Translation Software Firm For $42.5M

15th Jul 2010 15:19

(Adds detail, analyst comment) By Tommy Stubbington and Jason Douglas Of DOW JONES NEWSWIRES LONDON (Dow Jones)--Translation services company SDL PLC (SDL.LN) Thursday said it agreed to buy an automatic translation software company for $42.5 million, in a deal that will allow its customers to translate larger volumes of online content quicker. SDL said the cash purchase of Los Angeles-based Language Weaver Inc. will reduce earnings in 2011 because of amortization charges but in the longer term will give the company exposure to a potentially huge automatic translation market. The translation market is worth about $15 billion a year, but only a tiny part--between $50 million and $100 million--currently uses automation technology, Chief Executive Mark Lancaster told Dow Jones Newswires. He expects that proportion to grow to 30% in the next three to five years, as human translators struggle to cope with the sheer volume of translation needed by multinational companies. "It's a pretty big paradigm shift," Lancaster said. He said the acquisition of Language Weaver--which booked a pretax loss of $1 million on revenue of $12.2 million for the year to Dec. 31--is intended to give SDL a market leading position in automatic translation. Lancaster estimates the enlarged group's market share at 50%. Investec analyst Gareth Evans said: "While the valuation multiples will raise some eyebrows, we believe that the deal will be of significant value, and that the group has, once again, moved early to take a material market share in an emerging segment of the Global Information Management space." Evans maintained his buy rating, with a target price of 558 pence. Shares at 1405 GMT up 17 pence, or 3.4%, at 520 pence in a lower FTSE 250 index--down 0.26%. -By Tommy Stubbington, Dow Jones Newswires; 44-20-7842-9268; [email protected] (END) Dow Jones Newswires July 15, 2010 10:19 ET (14:19 GMT)