PARIS and SUNNYVALE, California, January 31 /PRNewswire/ --

ILOG(R) (Nasdaq: ILOG; Euronext: ILO, ISIN: FR0004042364) today announced results for the second quarter of fiscal 2008, ended December 31, 2007, highlighted by 22% revenue growth year-over-year. Revenues for the quarter were US$48.0 million compared with US$39.4 million for the second quarter last year. U.S. GAAP earnings per share were US$0.15 compared with US$0.05 last year.

"We had a good quarter in a tough environment with license growth at 23% and significant improvement in our profitability both sequentially and year-over-year," said ILOG Chairman and CEO, Pierre Haren. "The solid sales pipeline resulted in strong growth in our optimization and supply chain applications. We were able to grow our business rule management system (BRMS) sales thanks to the diversification of our BRMS customer base away from financial institutions, achieving notable wins in other industries including transportation and through applications including commissioning, data cleansing and loyalty programs. We were also pleased to meet our revenue target without large deals this quarter, underscoring demand for our products to address today's business challenges across industries and geographies."

Revenue Trends

In addition to 23% license growth, ILOG also achieved worldwide revenue increases of 23% in maintenance and 18% in professional services. Revenue growth across all geographies was evenly distributed: Europe revenues rose 25%, the U.S. grew 20% and Asia grew 19%.

Following the acquisition of LogicTools, ILOG's supply chain applications business gathered momentum in the U.S., as witnessed by strong license growth for LogicNet Plus XE(R) supply chain network planning product. New customers included a leading U.S. chemical company and one of the most-recognized supermarket dairy brands. LogicTools products are in a market development phase in Europe following their official launch there early in the second quarter.

Strong royalty revenues for ILOG's optimization technology and positive momentum of the new release of CPLEX for planning and scheduling applications resulted in 55% year-over-year growth for combined license and maintenance revenues. In addition to revenues from two major Independent Software Vendors and a CPLEX renewal with Areva, the French nuclear energy leader, key optimization deals were signed with a large Spanish water utility and a major German automotive manufacturer.

ILOG's visualization products had 8% combined license and maintenance revenue growth with several notable deals including Alcatel Lucent in Italy for a telecom network management application. ILOG's visualization product line benefits from current trends in the industry for Rich Internet Applications (RIA) and interactive visualization to support Web 2.0 and business intelligence (BI) initiatives. Early in the second quarter, the company unveiled ILOG Elixir(R), a new graphical data display library built on the Adobe Flex(R) platform, which further strengthens the product line's RIA relevance.

The ILOG BRMS product line achieved combined license and maintenance revenue growth of 9% on top of a very strong comparison base in the second quarter of fiscal year 2007, when growth in that business had neared 40%. In the current year's fiscal quarter, strong demand for BRMS products from a diverse customer base more than offset the dip in the mortgage business in the U.S. Key deals for BRMS in the quarter included repeat business from Greek banking leader Eurobank EFG, which will be further leveraging ILOG JRules for additional applications as the bank expands its business process management (BPM) initiatives. In the U.S., the company also had good diversification across industries outside of financial services for its BRMS products, illustrated by deals with a leading U.S. airline for a loyalty management program and with AT&T. Asia also had strong BRMS demand with a sizeable deal with a large Singapore Ministry and from China Pacific Insurance Co., Ltd.

"We're seeing growing interest from customers in leveraging our technologies to enhance BI platforms, including BRMS related to operational BI," added Haren. "We look forward to developing this new business opportunity throughout 2008 as we further diversify our BRMS business to supplement their essential nature for BPM and service-oriented-architecture (SOA) markets."

Business Outlook

ILOG continues to expect meeting its 20% revenue growth target for fiscal year 2008. However, two factors have had a negative impact on margins: the weaker dollar and the less favorable IT spending environment. Thus ILOG now believes that it is unlikely to overcome in the remaining two quarters of fiscal year 2008 the entire operating profit shortfall from the quarter ended September 30, 2007. Therefore, rather than the US$10 million target stated earlier, ILOG now expects to achieve a fiscal year 2008 U.S. GAAP operating profit in excess of US$6 million, or 3% of revenues.

Conference Call

ILOG management will be hosting a conference call today at 10 a.m. Eastern Time or 4 p.m. Central European Time to discuss second fiscal quarter results. To listen, please visit http://www.ilog.com/corporate/investor and utilize the WebCast link. To participate, please contact Gavin Anderson at +44-20-7554-1400. A replay of the call will be available later today.

About ILOG

ILOG delivers software and services that empower customers to make better decisions faster and manage change and complexity. Over 3,000 corporations and more than 465 leading software vendors rely on ILOG's market-leading business rule management systems (BRMS), supply chain planning and scheduling applications as well as its optimization and visualization software components, to achieve dramatic returns on investment, create market-defining products and services, and sharpen their competitive edge. ILOG was founded in 1987 and employs more than 860 people worldwide. For more information, please visit http://www.ilog.com.

Forward-looking Information

For purposes herein, ILOG is also referred to as "us", "we" and/or the "Company". Many of the statements included in this release, as well as oral statements that may be made by us or by officers, directors or employees acting on behalf of us, constitute or are based on forward looking statements within the meaning of the United States Securities laws. All statements other than statements of historical facts, including, among others, statements regarding the implementation of the Company's business strategy, trends in the software industry, the Company's financial outlook, liquidity and working capital, the creation of co-selling and co-marketing relationships and strategic alliances, the increased penetration of the Company's existing customers, the sale of the Company's service packages, the market risks associated with exchange rates, changes in the balance of the classes of the Company's business and other statements relating to the Company's plans, objectives, expectations, intentions, future business development and economic performance are or may be forward looking. In addition to statements that are forward-looking by reason of context, other forward-looking statements generally may be identified by the use of words such as "may", "will", "should", "expect", "estimate", "anticipate", "intend", "plan", "believe", "continue", "outlook", "judgment", "predict" or other similar expressions, although the absence of such words does not necessarily mean that a statement is not forward-looking. These forward-looking statements involve a number of known and unknown risks, uncertainties and other factors that could cause the Company's actual results and outcomes to be materially different from historical results or from any future results expressed or implied by such forward-looking statements. Factors that might cause such a difference include, but are not limited to quarterly fluctuations in our operating results and the price of our Shares or ADSs, factors adversely affecting any one of our three product lines, the need to have sufficient consultants available to staff an unpredictable demand for our consulting services, lost revenues due to consultants with specialized technical expertise occupied on competing consulting engagements, our investments in vertical products which carry high implementation costs that we discount in order to promote customer purchases, intense competition and consolidation in our industry, the extended length and variability of our sales cycle and concentration of transactions in the final weeks of a quarter, which could result in substantial fluctuations in operating results and may prevent accurate forecasting of financial results, the increasing number of consulting engagements, which are exposed to greater risk of non-payment; our dependence on certain major independent software vendors, changing market and technological requirements, our ability to provide professional services activities that satisfy customer expectations, the impact of currency fluctuations on our profitability, changes in tax laws or an adverse tax audit, errors in our software products, the loss of key personnel, logistical difficulties, cultural differences, product localization costs, import and tariff restrictions, adverse foreign tax consequences and fluctuations in currencies resulting from our global operations, the impact of intellectual property infringement disputes, our heavy dependence on our proprietary technology, risks related to consummation and integration of acquisitions and minority investments, the incurrence of debt and contingent liabilities and write-off of expenses resulting from acquisitions or minority investments, the impact of dilutive share issuances, the limitations imposed by French law or our by-laws that may prevent or delay an acquisition by ILOG using its Shares, changes in accounting principles that could affect our operating profits and reported results, and other matters not yet known to us or not currently considered material by us. All written and oral forward-looking statements attributable to us, or persons acting on our behalf, are qualified in their entirety by these cautionary statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management's analysis only as of the date hereof. Unless required by law, ILOG undertakes no obligation to revise these forward-looking statements to reflect new information or events, circumstances, changes in our expectations or otherwise that arise after the date hereof. Readers should carefully review the events and other matters described in other documents we file or submit from time to time with the United States Securities and Exchange Commission (the "SEC"), including reports on Forms 20F and 6-K submitted by us which are on file with the SEC and available at the SEC's website at http://www.sec.gov/.

ILOG S.A. Consolidated Income Statements (unaudited) In U.S. GAAP in thousands of U.S. dollars and thousands of shares, except per share data Three Months Ended December 31 December 31 December 31 December 31 2007 2006 2007 2006 (in euros) (in euros) Revenues: License fees $23,202 $18,871 15,962 14,446 Maintenance 13,275 10,796 9,158 8,365 Professional services 11,473 9,685 7,896 7,474 Total revenues 47,950 39,352 33,016 30,285 Cost of revenues: License fees 280 251 193 192 Maintenance 1,353 1,376 928 1,061 Professional services 9,717 7,456 6,698 5,761 Total cost of revenues 11,350 9,083 7,819 7,014 Gross profit 36,600 30,269 25,197 23,271 Operating expenses: Marketing and selling 19,106 15,872 13,047 12,259 Research and development 8,900 7,641 6,058 5,982 General and administrative 6,074 5,668 4,227 4,304 Total operating expenses 34,080 29,181 23,332 22,545 Income (loss) from operations 2,520 1,088 1,865 726 Net interest income and other 489 558 317 414 Income (loss) before taxation 3,009 1,646 2,182 1,140 Income taxes expense 232 675 158 510 Net income of fully consolidated subsidiaries 2,777 971 2,024 630 Equity (loss) in earnings of affiliates 68 (79) 47 (60) Net income $2,845 $892 2,071 570 Earnings per share - Basic $0.15 $0.05 0.11 0.03 - Diluted $0.15 $0.05 0.11 0.03 Share and share equivalents used in per share calculations - Basic 18,560 18,225 18,560 18,225 - Diluted 18,409 18,607 18,421 18,598

ILOG S.A. Consolidated Income Statements (unaudited) In U.S. GAAP in thousands of U.S. dollars and thousands of shares, except per share data Six Months Ended December 31 December 31 December 31 December 31 2007 2006 2007 2006 (in euros) (in euros) Revenues: License fees $38,478 $35,063 27,025 27,154 Maintenance 26,180 21,214 18,547 16,542 Professional services 24,128 18,845 17,083 14,667 Total revenues 88,786 75,122 62,655 58,363 Cost of revenues: License fees 619 481 440 372 Maintenance 2,555 2,613 1,798 2,028 Professional services 20,276 14,492 14,350 11,280 Total cost of revenues 23,450 17,586 16,588 13,680 Gross profit 65,336 57,536 46,067 44,683 Operating expenses: Marketing and selling 35,528 29,901 24,920 23,200 Research and development 18,628 15,169 13,075 11,862 General and administrative 11,732 10,348 8,259 7,934 Total operating expenses 65,888 55,418 46,254 42,996 Income (loss) from operations (552) 2,118 (187) 1,687 Net interest income and other 1,097 1,136 740 852 Income (loss) before taxation 545 3,254 553 2,539 Income taxes expense 380 1,036 266 793 Net income of fully consolidated subsidiaries 165 2,218 287 1,746 Equity (loss) in earnings of affiliates 112 (79) 78 (60) Net income $277 $2,139 365 1,686 Earnings per share - Basic $0.01 $0.12 0.02 0.09 - Diluted $0.02 $0.12 0.02 0.09 Share and share equivalents used in per share calculations - Basic 18,549 18,143 18,549 18,143 - Diluted 18,390 18,476 18,415 18,459

ILOG S.A. Condensed Consolidated Balance Sheets (unaudited) In thousands of U.S. dollars December 31 June 30 December 31 June 30 2007 2007 2007 2007 (in euros) (in euros) Assets Current assets: Cash and cash equivalents $62,872 $46,040 43,017 40,781 Short-term investments 21 8,616 - - Accounts receivable 39,708 42,161 26,973 31,219 Other receivables and prepaid expenses 14,318 12,873 8,890 8,656 Total current assets 116,919 109,690 78,880 80,656 Long-term assets: Tangible and intangible assets - net 16,019 16,480 10,881 12,204 Other long-term assets 21,611 18,958 16,820 16,346 Total long-term assets 37,630 35,438 27,701 28,550 Total assets $154,549 $145,128 106,581 109,206 Liabilities and Shareholders' Equity Current liabilities: Accounts payable and other current liabilities $28,963 $28,465 19,674 21,266 Current portion of capital lease obligations 103 206 70 153 Deferred revenue 32,195 32,884 21,875 24,353 Total current liabilities 61,261 61,555 41,619 45,772 Long-term liabilities: Long-term portion of capital lease obligations - 17 - 12 Other long-term liabilities 4,063 2,536 2,727 1,690 Total long-term liabilities 4,063 2,553 2,727 1,702 Total liabilities 65,324 64,108 44,346 47,474 Shareholders' equity: Paid-in capital 101,893 98,962 52,359 50,635 Treasury stock (9,000) (8,511) (7,300) (6,912) Accumulated deficit and other (3,668) (9,431) 17,176 18,009 Total Shareholders' equity 89,225 81,020 62,235 61,732 Total liabilities and shareholders' equity $154,549 $145,128 106,581 109,206

ILOG S.A. Condensed Consolidated Statements of Cash Flow (unaudited) In thousands of U.S. dollars Six Months Ended December 31 December 31 December 31 December 31 2007 2006 2007 2006 (in euros) (in euros) Cash flows from operating activities: Net Income $277 $2,139 365 1,686 Depreciation and amortization 1,999 1,189 1,403 1,008 Share-based compensation 1,865 1,244 946 665 Deferred income taxes 139 867 102 723 Unrealized (gain) loss on derivative instruments (121) (102) (79) (75) (Gain) loss of equity in affiliates (112) 79 (78) 60 Change in working capital 1,233 (5,977) 1,310 (4,459) Net cash provided (used) by operating activities 5,280 (561) 3,969 (392) Cash flows from investing activities: Acquisition of fixed assets and business (1,522) (7,463) (1,082) (5,822) Loans and interests on loans (590) - (402) - Sale (Purchase) of short term investments, net 8,731 (127) - - Net cash (used in) provided by investing activities 6,619 (7,590) (1,484) (5,822) Cash flows from financing activities: Repayment of capital lease obligations (135) (193) (95) (152) Cash proceeds from issuance of shares 1,066 1,933 777 1,503 Purchase of treasury stock (489) (1,358) (389) (1,044) Net cash provided by financing activities $442 $382 293 307 Impact of exchange rate changes on cash and cash equivalents 4,491 1,588 (542) (363) Net increase (decrease) in cash, cash equivalents 16,832 (6,181) 2,236 (6,270) Cash and cash equivalents, beginning of period 46,040 61,442 40,781 54,469 Cash and cash equivalents, end of period $62,872 $55,261 43,017 48,199

Discussion of Income Statement for the Quarter Ended December 31, 2007

Revenues and Gross Margin

Revenues in the quarter increased to US$48.0 million from US$39.4 million, or by 22%, compared to the same quarter in the previous year. Because of a stronger euro, at an average exchange rate of 1 euro = US$1.45 compared to 1 euro = US$1.29 in the same quarter last year, revenues expressed at prior year constant currency rates increased by a lower percentage of 16%.

Revenues by region were as follows (in thousands): Three Months Ended December 31 December 31 Change 2007 2006 As Reported Constant US$ North America $21,420 $17,905 20% 20% Europe 22,038 17,657 25% 13% Asia Pacific 4,492 3,790 19% 11% Total revenues $47,950 $39,352 22% 16%

License fee revenues increased by 23% compared to the same quarter last year as a result of strong activity across all geographies and industries, in particular for our optimization product line. Maintenance revenues grew 23% in the quarter compared to the same quarter last year. This increase is the ongoing result of ILOG's growing installed base and an excellent renewal rate of our maintenance contracts.

Professional services revenues continued to grow, posting an increase of 18% in the quarter compared to the same quarter last year. This overall growth of our professional services revenues was lower than in the previous quarters due to slower growth in North America as a consequence of a lower number of engagements. The level of utilization of our consultants has been negatively impacted by the rapid decrease of our mortgage-related consulting contracts. The resulting underutilization of our consulting resources affected the related gross margin for the quarter at 15% compared to 23% for the same period in the preceding year.

Operating Expenses

The 17% increase in operating expenses over the same quarter last year is in line with management forecasts, and is primarily due to the addition of LogicTools, as well as additional hiring in China and consulting staff, and also the stronger euro that mainly affects our French-based research and development activities.

On December 31, 2007, ILOG had 865 employees, at the same level as September 30, 2007, and higher than 775 one year earlier. This increase is mainly due to the integration of LogicTools' 43 employees and the hiring in China of 30 people for the Shanghai Development Center specialized in consulting and pre-sales activities.

Research and development costs include a French research tax credit in the quarter for US$1.6 million, the same amount was recorded in the same quarter last year. This US$1.6 million tax credit is recorded as a reduction of the research and development costs and relates to research costs incurred in calendar 2007. A new and more favorable tax law will be applicable in calendar 2008. The portion of the tax credit calculated as a percentage of the costs related to eligible research projects will significantly increase and be more predictable. As a result, commencing in March 2008, we will accrue for this portion of the 2008 calendar French research tax credit every quarter.

ILOG also recorded as part of its general and administrative expenses an accrual for a tax exposure related to sales taxes identified during the quarter in Canada and estimated at US$0.4 million.

Income Taxes

The income tax expense amounted to US$0.2 million compared to US$0.7 million, in the same quarter last year. The income tax expense in the quarter is comprised of a current tax charge of US$0.1 for the countries posting pre-tax income and a deferred tax charge for US$0.1 million in France, utilizing part of the US$1.5 million deferred tax benefit accounted for at the end of June 2007. This deferred tax benefit represented part of the net operating losses carried forward in France that ILOG is more likely than not going to use in current and upcoming fiscal years.

Discussion of Income Statement for the Six Months Ended December 31, 2007

Revenues and Gross Margin

Revenues in the six-month period increased to US$88.8 million from US$75.1 million, or by 18%, compared to the same period in the previous year. Expressed at prior year constant currency rates, revenues increased by 13%.

Revenues by region were as follows: Six Months Ended December 31 December 31 Change 2007 2006 As Reported Constant US$ North America $41,343 $35,586 16% 16% Europe 39,317 31,655 24% 14% Asia Pacific 8,126 7,881 3% -3% Total revenues $88,786 $75,122 18% 13%

License revenues increased by 10%, from US$35.1 million in the same six-month period last year, to US$38.5 million this year. The growth is primarily due to the addition of the LogicTools business, and to a lesser extent to the other product lines. Overall maintenance revenues increased by 23% compared to last year, reflecting ILOG's growing installed base and excellent renewal rates for our maintenance contracts.

Professional services increased by 28% for the period, year over year, reflecting the excellent growth of this activity across our geographies, thus mitigated by the slow-down in the December quarter in North America. For the six-month period, gross margin for professional services decreased to 16%, as compared to 23% last year. As explained above, the lower utilization of ILOG consultants in North America as a result of the lower than expected activity negatively impacted the margin. The gross margin had already been impacted in the prior quarter by a lower utilization of ILOG consultants in Asia and in supply chain applications.

Operating Expenses

The 19% increase in operating expenses over the prior year is primarily due to additional hiring, salary increases that were applied in the second quarter of last year and the stronger euro, affecting approximately half of ILOG's expenses, which are denominated in euros. ILOG also recorded an accrual for tax exposure identified during the quarter ending December 31, 2007 in Canada in the amount of US$0.4 million.

Income Taxes

The income tax expense amounted to US$0.4 million compared to US$1 million, in the same six-month period last year. The income tax expense in the period is comprised of a current tax charge of US$0.3 million for the countries posting pre-tax income and a deferred tax charge of US$0.1 million in France, utilizing part of the US$1.5 million deferred tax benefit accounted for at the end of June 2007. This deferred tax benefit represented part of the net operating losses carried forward in France that ILOG is more likely than not going to use in current and upcoming fiscal years.

Balance Sheet and Cash Flow Discussion

Including short-term investments, ILOG's cash position totaled US$62.9 million at December 31, 2007, up from US$54.7 million on June 30, 2007. Collection of accounts receivable improved significantly to reach a record low level of 60 days sales outstanding at the end of the second quarter compared to 76 days in past quarters. Excluding short-term investments, net cash used for investing activities during the six-month period amounted to US$2.1 million, for the purchase of IT equipment and a cash advance to one of our equity investments, Prima Solutions. Cash provided by financing activities netted US$0.4 million and mainly included the acquisition of treasury stocks in the amount of US$0.5 million offset by proceeds from issuance of shares under exercise of stock options in the amount of US$1.1 million.

As of December 31, 2007, shareholders' equity was US$89.2 million, an increase of US$8.2 million from US$81.0 million at June 30, 2007, mainly as a result of the stronger euro on our currency translation adjustments and the exercise of stock options and warrants. On December 31, 2007, ILOG had 19,200,848 shares issued and outstanding, compared to 19,062,464 at June 30, 2007, due to the exercise of 138,384 stock options and warrants.

Accounting Principles

ILOG's financial statements in U.S. dollars are prepared in accordance with generally accepted accounting principles in the United States (U.S. GAAP). Figures presented in euros have been prepared in accordance with International Financial Reporting Standards ("IFRS"). Following European regulation 1606/2002 dated July 19, 2002, all EU-listed companies are required to apply IFRS in preparing their financial statements for financial years commencing January 1, 2005 and thereafter.

Following the rule issued by the SEC on December 21, 2007, ILOG decided to stop preparing audited U.S. GAAP financial statements in U.S. dollars, and will only prepare audited IFRS financial statements in euros for the year ended June 30, 2008 without audited reconciliation to U.S. GAAP. As a consequence, ILOG will gradually transition its financial reporting from U.S. GAAP and U.S. dollar to IFRS and euros.

Constant Exchange Rates

Where constant exchange rates are referred to in the above discussion, current period results for entities reporting in currencies other than U.S. dollars are converted into U.S. dollars at the prior year's exchange rates, rather than the exchange rates for the current period. This information is provided in order to assess how the underlying business performed before taking into account currency exchange fluctuations.

Press Release for French Shareholders

A translation of this press release in the French language is also available.

ILOG and LogicTools are registered trademarks of ILOG Inc. and ILOG S.A. LogicNet Plus XE, ILOG Elixir, ILOG CPLEX and ILOG JRules are trademarks of ILOG. All other trademarks are the property of their respective owners.

Web site: http://www.ilog.com

Investors, Jerome Arnaud of ILOG, +33-(0)-6-07-35-80-87, or +1-408-991-7103, jarnaud@ilog.com, or Bernard Compagnon of Gavin Anderson & Company, +44-20-7554-1400 (London), for ILOG; or Media, Susan Peters of ILOG, +1-408-991-7109, speters@ilog.com