Magic Software Reports Results for the First Quarter 2009

-- Company reports increased profit despite CHALLENGING ECONOMIC CONDITIONS --

OR YEHUDA, Israel, May 11 /PRNewswire-FirstCall/ -- Magic Software Enterprises
Ltd. (Nasdaq: MGIC), a provider of application platforms and business and
process integration solutions, today announced its financial results for the
first quarter, ended March 31, 2009. All references to $ are to US Dollars.

Financial Highlights
-- Total revenues were $13.8 million, a decrease of 9% compared to $15.1
million in the first quarter of 2008. The decrease is primarily a
result
of a strengthened dollar rate, which accounted for approximately 6% of
the total revenue decrease. Recession factors in the US and Japan also
accounted for approximately 3% of the decrease in revenue compared to
the parallel period of 2008.
-- Operating income amounted to $0.7 million, compared to a loss of $0.1
million recorded in the same period of 2008.
-- Net income totaled $0.7 million compared to $0.1 million in the first
quarter of 2008.
-- Net income on a non-GAAP basis was $0.9 million compared to $0.3
million
in the first quarter of 2008.

-- Total cash and short-term investments as of March 31, 2009 increased
by
10% to $36.0 million compared to $32.6 million as of December 31,
2008.

Comments of Management
Guy Bernstein, Chairman of Magic Software, commented on the results: "While
the current environment remains challenging with longer sales cycles, our
growth drivers continue to remain in place. We see increasing demand for our
application platform and business integration solutions, especially as these
products can enhance business competitiveness during economic downturns. We
plan to remain cautious and focus on maintaining cost control and business
flexibility that will allow us to react swiftly to market evolutions as they
occur."

Summary of the Quarter
-- Magic Software is now listed by Gartner as one of 13 strategic
partners
and long-term providers of application infrastructure, [Yefim V.
Natis,
Jess Thompson, Massimo Pezzini, Daniel Sholler, Kimihiko Iijima, 'A
Summary of Magic Quadrants for Application Infrastructure', 3rd
March 2009, ID G00165017].
-- The uniPaaS application platform continues to gain recognition among
authoritative media publications such as Forbes.com, SoftwareCEO and
Computer Business Review (CBR) in this quarter.
-- Despite the severe recession in Japan, the company has gained new
Japanese customers now using uniPaaS to develop RIA.
-- Existing application platform partners worldwide are showing increased
interest in migrating to uniPaaS to prepare for the new opportunities
presented by RIA and SaaS.

-- The iBOLT business and process integration suite has new connectors
and
adaptors for HL7 (healthcare), SAP R/3 and the Data Replicator for
Salesforce.com. The expanded iBOLT range has facilitated project wins
in
Germany, the Netherlands, the United Kingdom and Japan, and has
attracted significant media attention from specialist IT media
publications including InsideCRM and E3 in Germany.

Non-GAAP Financial Measures
This release includes non-GAAP operating income, net income, basic and diluted
earnings per share and other non-GAAP financial measures. These non-GAAP
measures exclude the following items:

-- Amortization of purchased intangible assets;
-- In-process research and development capitalization and amortization
and;

-- Equity-based compensation expense.

Magic Software's management believes that the presentation of non-GAAP
measures provide useful information to investors and management regarding
financial and business trends relating to the Company's financial condition
and results of operations as well as the net amount of cash generated by its
business operations after taking into account capital spending required to
maintain or expand the business.

These non-GAAP financial measures are not in accordance with, or an
alternative for, generally accepted accounting principles and may be different
from non-GAAP financial measures used by other companies. In addition, these
non-GAAP financial measures are not based on any comprehensive set of
accounting rules or principles. Magic Software believes that non-GAAP
financial measures have limitations in that they do not reflect all of the
amounts associated with Magic Software's results of operations as determined
in accordance with GAAP and that these measures should only be used to
evaluate Magic Software's results of operations in conjunction with the
corresponding GAAP measures.

Please refer to the Reconciliation of Selected Financial Metrics from GAAP to
Non-GAAP tables below.

About Magic Software
Magic Software Enterprises Ltd. (Nasdaq: MGIC) is a leading provider of
multiple-mode application platform solutions - including Full Client, Rich
Internet Applications (RIA) or Software-as-a-Service (SaaS) modes - and
business and process integration solutions. Magic Software has offices in 10
countries and a presence in over 50, as well as a global network of ISV's,
system integrators, value-added distributors and resellers, and consulting and
OEM partners. The company's award-winning code-free solutions give partners
and customers the power to leverage existing IT resources, enhance business
agility and focus on core business priorities. Magic Software's technological
approach, product roadmap and corporate strategy are recognized by leading
industry analysts. Magic Software has partnerships with global IT leaders
including SAP AG, salesforce.com, IBM and Oracle. For more information about
Magic Software and its products and services, visit www.magicsoftware.com.

Except for the historical information contained herein, the matters discussed
in this news release include forward-looking statements that may involve a
number of risks and uncertainties. Actual results may vary significantly based
upon a number of factors including, but not limited to, risks in product and
technology development, market acceptance of new products and continuing
product conditions, both here and abroad, release and sales of new products by
strategic resellers and customers, and other risk factors detailed in the
Company's most recent annual report and other filings with the Securities and
Exchange Commission.

Contacts
Hadas Gazit-Kaiser, CFO
Magic Software Enterprises Ltd.
Tel. +972 (0)3 538 9284
ir@magicsoftware.com

MAGIC SOFTWARE ENTERPRISES LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
U.S. dollars in thousands (except per share data)

Three months ended
March 31,
2009 2008
Unaudited

Revenues 13,770 15,069
Cost of Revenues 6,737 6,785
Gross profit 7,033 8,284
Research and development, net 339 560
Selling, general and administrative expenses 5,954 7,860
Total operating expenses, net 6,293 8,420
Operating income (loss) 740 (136)
Financial income, net 64 180
Other income, net - 39
Income before taxes on income 804 83
Taxes on income 90 23
Income after taxes on income 714 60
Equity in losses of affiliates - (8)
Net income 714 52

Basic net earnings per share 0.02 0.00
Diluted net earnings per share 0.02 0.00

Weighted average number of shares used in
computing net earnings per share
Basic 31,894 31,763
Diluted 31,938 32,001

MAGIC SOFTWARE ENTERPRISES LTD.
RECONCILIATION BETWEEN GAAP AND NON-GAAP
STATEMENTS OF OPERATIONS FOR COMPARATIVE PURPOSES
U.S. dollars in thousands (except per share data)

Three months ended
March 31,
2009 2008
Unaudited

GAAP operating income (loss) 740 (136)
Amortization of intangibles 869 578
Capitalization of software development (755) (856)
Stock-based compensation 56 491
Total adjustments to GAAP 170 213
Non-GAAP operating income 910 77

GAAP net income 714 52
Total adjustments to GAAP as above 170 213
Non-GAAP net income 884 265

Non-GAAP basic net earnings per share 0.03 0.01
Weighted average number of shares used
in computing basic net earnings per share 31,894 31,763

Non-GAAP diluted net earnings per share 0.03 0.01
Weighted average number of shares used in
computing diluted net earnings per share 31,947 32,001

MAGIC SOFTWARE ENTERPRISES LTD.
CONSOLIDATED BALANCE SHEETS
U.S. dollars in thousands

March 31, December 31,
2009 2008
(Unaudited)

ASSETS
CURRENT ASSETS:
Cash and cash equivalents 20,447 27,309
Short-term bank deposits 12,645 1,810
Available for sale marketable securities 2,918 3,469
Trade receivable, net 11,746 13,140
Other accounts receivable and
prepaid expenses 2,152 1,933
Current assets of discontinued
operations 29 31
Total current Assets 49,937 47,692

LONG-TERM INVESTMENTS:
Severance pay fund 169 188
Long-term lease deposits 326 290
Total long-term investments 495 478

Property and equipment, net 5,279 5,436
Goodwill 16,267 16,829
Other intangible assets, net 10,542 10,656

TOTAL ASSETS 82,520 81,091

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
Short-term credit and current maturities
of long term loans 115 147
Trade payables 2,943 2,988
Deferred revenues 4,996 1,643
Accrued expenses and other accounts payable 7,387 8,779
Current liabilities of discontinued
operations 355 372
Total current liabilities 15,796 13,929

Long-term loans 77 33
Accrued severance pay 341 374
Total non-current Liabilities 418 407

SHAREHOLDERS' EQUITY 66,306 66,755

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 82,520 81,091

SOURCE Magic Software Enterprises Ltd.

Hadas Gazit-Kaiser, CFO, Magic Software Enterprises Ltd., +972 (0)3 538 9284,
ir@magicsoftware.com