Ilog Announces 2008 Fourth Quarter and Fiscal Year End Results

Paris, France and Sunnyvale - 28 July 2008

ILOG® (NASDAQ: ILOG; Euronext: ILO, ISIN: FR0004042364) today announced the results of its fiscal fourth quarter with revenues of $46.1 million, net income of $0.1 million and fully diluted U.S. GAAP earnings per share (EPS) of $0.00. This compares with revenues of $46.3 million, net income of $1.9 million, and EPS of $0.10 for the fourth quarter last year.

The Company also announced 2008 fiscal year revenues of $181.0 million, up 12% compared to $161.5 million in the prior fiscal year. Net income for the year was $0.5 million, compared to $4.9 million in fiscal 2007. Fully diluted EPS for the 2008 fiscal year was $0.03 compared with $0.26 last year. The Company closed the fiscal year with a cash position of nearly $74 million.

“In the fourth quarter, we faced a challenging economic environment, notably in the financial sector, which remains a key source of revenues for ILOG. In spite of the successful efforts we have made in the past year to further diversify our customer base, due to this environment, companies either delayed or cancelled some business rule management systems (BRMS) projects,” said ILOG Chairman and CEO, Pierre Haren. “However, we achieved a solid level of growth in our optimization product line, and our supply chain applications business continues to gain traction, especially outside of the U.S.”

“The weak dollar against the euro continued to negatively impact our profitability. In order to contain this effect, we started reducing headcount on a voluntary basis, finishing the year with 847 people, at the same level as in the same month last year. Headcount management has enabled us to deliver positive net income for the full fiscal year. We also improved gross profit in our consulting activities to over 20%, thanks to better utilization of our consultants,” added Haren.

Business Trends

BRMS license and maintenance revenues were down 13% compared with strong performance recorded in the last fiscal year’s fourth quarter. Despite uneven demand for BRMS products in the quarter as a result of the weak financial services sector, ILOG signed an application license agreement with a leading Wall Street investment house for a customer reporting/billing application. The Company was also able to leverage demand in other markets such as insurance, healthcare and transportation with several large deals, including a more than $1 million renewal with a world-leading shipping company for ILOG JRules® and ILOG Rules for .NET® for customer profile management and shipping management, among other applications.

Optimization product demand in Europe was strong, with more pickup in the UK. The optimization product suite (excluding supply chain applications business) achieved 13% growth year-over-year as organizations moved to optimize their resources in challenging economic times. A notable deal was a $1 million-plus enterprise license agreement from a leading computer chipmaker for ILOG CPLEX® and ILOG visualization products, which will be used for several applications including production planning.

The Company’s supply chain applications business grew 35% year-over-year with ILOG’s applications gaining traction in Europe and Asia. This was evidenced by deals with a leading computer storage maker in Singapore and NS Solutions Japan for ILOG Plant PowerOps® integrated production planning and scheduling solutions. The ILOG LogicNet Plus XE® supply chain network design product was purchased by sugar producers in Germany and Austria and a German tobacco company.

Visualization revenues were stable year-over-year, reflecting ongoing demand for display technology for rich Internet applications. The visualization products also benefited from a large renewal with the leading Chinese telecom equipment maker, Huawei, for network management displays.

Proposed acquisition by IBM

ILOG today also announced it has signed an agreement regarding a proposed acquisition by IBM at €10 per ILOG share in cash. Please refer to a separate press release jointly issued by ILOG and IBM today.

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