SDL announced that its revenue for the first half of 2007 was up 20% for a total of £54.478 million, profits before taxes and amortization were up 72%, and gross margins grew to 51.6% from 49.5% in the same period last year. The company noted positive contributions to the top line by the CMS company it acquired in May. It also announced that it provides translation services and/or technology to 10 of the world’s largest brands — Coca-Cola, General Electric, IBM, Intel, McDonald’s, Mercedes, Microsoft, Nokia, Toyota, and Walt Disney.

Placing third on our consolidated ranking of the top 20 companies providing language services, SDL differs from most of the other language service providers on the list in that it derives a significant portion of its revenue from its technology portfolio — 21.9% in the first half of 2007 versus 19.2% for the comparable 6 months in 2006. Earlier this year the company buttressed its software portfolio (and its international footprint) by acquiring PASS Engineering (Germany) for visual localization and Tridion (Netherlands) for web content management. SDL seems to have quickly integrated these companies into its technology and marketing stack. It’s also eating its own dog food with a new website built on Tridion’s web content manager.

The Tridion purchase appears at first blush to have been spectacular for the company’s financial position: The Dutch team accounted for 7% of SDL’s H1-2007 revenue, but fully a quarter its of pre-tax profits — and all of this in only the final month-and-a-half of the reporting period. However, if you harbor an inner financial geek (we do, though this is only slightly less shameful than Renato’s lumbar tattoo), you find numbers compelling because of the stories they tell. The Tridion story, when teased out of the footnotes and confirmed in a conversation with SDL’s CEO Mark Lancaster, is that these apparent rock-star results are an anomaly arising in part from the brevity of the consolidation period. Tridion will represent a respectable but incremental improvement in both the top and the bottom lines for SDL. The lasting impact from the acquisition will depend on the straightforward business of integrating the product lines, cross-selling to each other’s customers, and growing the market for language and content solutions for managing global information.

For buyers (and shareholders), SDL’s financial health and expanding technology portfolio will be welcome news. For other LSPs, they represent the classic good news, bad news story. The good news is that SDL is doing very well. It is growing, it is profitable, and its translation automation technologies are being widely adopted — all this bodes well for the language industry as a whole. The bad news is that SDL is doing very well. It is a strong competitor and it is getting stronger as its margin improvement is fueled by the efficiencies that its technology brings — with subsidies from its competitors that buy its technology. It’s a classic Catch-22.