FT.com / Companies / IT - SAP confident of software sales

FT.com / Companies / IT - SAP confident of software sales

SAP confident of software sales
By Gerrit Wiesmann in Frankfurt

Published: January 31 2008 02:13 | Last updated: January 31 2008 02:13

SAP, the German business software manufacturer, expects that it, and many rivals, will avoid any serious fallout from the economic slowdown rippling in the wake of months of global financial turmoil.

Investors have grown increasingly worried that economic woes will lead companies to cut spending on software and computers, much as they did in 2002 when technology stocks went into tailspin.

However, Henning Kagermann, SAP chief executive, said his company had canvassed clients and concluded that demand for software that manages inventories and client data would remain strong.

“Software like ours is always in demand – in a boom because companies want to sell more, and in difficult phases because they’re looking to improve productivity,” he told the Financial Times.

It would be “absurd” to compare the current situation with that of 2002, when companies were forced to cut “exaggerated IT spending”, fed by the technology boom, at a speed that hurt software houses.

“The companies learned their lessons and became more careful with [information technology] spending,” said Mr Kagermann. “So I don’t think they’ll be forced to hit the brakes a second time.”

SAP said its operating margin would edge higher to 27.5-28 per cent this year, from 27.3 per cent in 2007, after being adjusted for writedowns and charges that accrued in the course of a big acquisition.

The company also said sales of its software and related services would grow by 12-14 per cent this year, when adjusted for currency moves, the same target set last year – which it beat by three points.

The projected slowing of growth comes as SAP integrates Business Objects, a software house it bought for €4.8bn ($7.1bn) last year, and introduces a new web-based product for small companies to market.

The projects are meant to reduce SAP’s dependency on selling software to the world’s largest corporations.

Mr Kagermann said that he would make a decision in spring or summer about whether he would extend his contract beyond early 2009.
Copyright The Financial Times Limited 2008