The U.S. Department of Justice looking into SDL's acquisition of Trados by:Don DePalma and Renato Beninatto

On January 26, 2006 we heard that the U.S

On January 26, 2006 we heard that the U.S. Department of Justice (DoJ) started a preliminary inquiry into SDL's July 2005 acquisition of Trados. We spoke with a person in the DoJ's Anti-Trust Division who told us that they had had come across news of the acquisition and felt they should look into it. At this stage it does not mean anything except that the DoJ wants to make sure that there were no violations of U.S. anti-trust law.

Last year we wondered whether consolidation in the language services industry would attract the interest of the DoJ or Neelie Kroes, the E.U.'s European Commissioner for Competition. We applied the Herfindahl Index, a calculator used to determine industry concentration and whether there is a monopoly, oligopoly, or tendency toward one or the other. Our calculations showed that the language services market was just moderately concentrated, so we said that no one has to worry yet.

How about the tools space? Last year we researched the entire language-centric tools industry. We found that it was a sub-US$100 million market characterized by mostly small firms with inadequate sales representation. The most accessible of the language technologies, translation memory (TM), was a 20-year old technology with about a dozen suppliers selling products and some open-source offerings. TM use is more limited than suppliers would like -- we estimate that at most 1 in 10 translators worldwide use it. Trados had been the de facto TM standard with roughly 60,000 licenses to SDL's 30,000 seats. Struggling for years, Trados' investors and management welcomed the acquisition.

SDL's success in integrating Trados into its product line is not assured. Our research into the acquisition showed that clients and language service providers are not thrilled with SDL's ownership of Trados, largely because SDL sells both technology and services. SDL's advantages in the marketplace have been its vision of global information management, its status as a public company, and its aggressive sales force. However, its acquisition of Trados energized competitors who responded with offerings such as Idiom's LSP Advantage program, trade-up programs from other suppliers, and more visible marketing efforts from Heartsome, Clay Tablet, DocZone, and others.

Related Research: Common Sense Advisory's Ranking of Top 20 Translation Companies

About the author

Don DePalma and Renato Beninatto are the principals of leading globalization, internationalization, localization, and translation research and consulting firm, Common Sense Advisory, Inc. For more information, send an e-mail to: info@commonsenseadvisory.com or visit http://www.commonsenseadvisory.com.

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