SAP sales drop by a third
By Gerrit Wiesmann in Frankfurt
Published: April 29 2009 18:14 | Last updated: April 29 2009 18:14
SAP, the world’s largest maker of business software, said sales fell by a third in the first quarter of 2009, highlighting companies’ reluctance to invest in information technology during a recession.
The slump was bigger than the 12 per cent drop in sales of such programs reported by rival Oracle in March. It led investors to sell SAP stock, although the shares rallied to close only 2 per cent lower at €29.50.
The German company said software sales dropped by a third to €418m ($557m). However, it managed to make up for this by raising revenues from maintaining SAP software installed on customers’ computers.
As a result, software and related services revenues were unchanged at €1.74m, outperforming Oracle, which saw joint revenues sink 2 per cent in its third quarter, which ran until the end of February.
For the full year, SAP said it continued to work on the “assumption” that software and related services revenues would be flat or fall by 1 per cent, allowing it to meet an operating-margin target of between 24.5 per cent and 25.5 per cent.
“While visibility for software revenues remains limited, we continue to take steps to protect our margin in this tough operating environment,” Léo Apotheker, SAP’s co-chief executive, said.
Mr Apotheker added that he was not worried by Oracle’s better performance in selling software at the start of 2009. SAP’s position as market leader was “not substantially changed” by what would prove to be a normal quarterly blip, he said.
Mr Apotheker signalled he did not want to follow Oracle into the hardware business after the US group agreed to buy server maker Sun. However, SAP’s strategy of organic growth would still be flanked by add-on purchases.
Mr Apotheker takes sole responsibility for SAP next month when his current co-chief executive Henning Kagermann retires.
SAP saw double-digit sales growth for much of 2008 – and an annual operating margin of 28.2 per cent – and it said as late as last summer that the crisis could be a boon as clients looked to cut costs with new software.
Yet, in autumn, the company warned that the fall-out from the global recession meant it could not give a sales forecast for 2009. Cost cuts – including a pay freeze and jobs cuts – followed.
SAP is cutting jobs for the first time in its 37-year history, aiming to reduce its workforce by 3,000 – 6 per cent of staff – to 48,500 by late 2009. Some 2,200 of these posts were cut last quarter.
This led to a one-off restructuring charge of €160m in the first three months of 2009, helping to drag operating income down 8 per cent to €332m.
Net income hit €204m, down 16 per cent from the first quarter of 2008.
Copyright The Financial Times Limited 2009