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BW Businessworld

SAP Lags Rivals As Profit Misses Forecasts

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German business software maker SAP's first quarter earnings fell short of results from its rivals and market expectations, despite double-digit growth in sales and operating profit.

SAP was expected to do well after US technology bellwethers Oracle and IBM showed strong results signalling unimpaired global tech spending.

But while total sales were slightly below analyst estimates, SAP's operating profit clearly missed the average forecast, which had anticipated a 39 per cent rise.

Operating profit in the first three months of the year rose by 26 per cent to 779 million euros ($1.14 billion) and its key software and software-related service revenue rose 20 per cent to 2.38 billion euros, SAP said on Thursday.

SAP, whose more than 109,000 customers include Apple, Audi, GE, McDonald's and Pepsi, bills itself as the world's leading provider of software for managing supply chains and customer relations.


DZ Bank analyst Oliver Finger said the figures were "quite disappointing", adding that growth of software and software related service revenue was relatively weak in Germany and that cost measures were higher than expected, hitting the operating margin.

The company reiterated key non-IFRS software and software-related service (SSRS) revenue, which includes revenue from license sales and maintenance services, was expected to rise 10-14 per cent this year at constant currencies.

It also reiterated full year operating profit is expected to be in a range of 4.45-4.65 billion euros and operating margin was expected to rise by 0.5-1.0 percentage points.

SAP bases its key outlook figures on non-international financial reporting standards, which exclude acquisition-related charges for example, because, SAP says, it allows investors a better comparison of year-on-year operating performance.

Co-CEO Jim Hagemann Snabe told Reuters Insider that the company was focused on organic growth not acquisiitons and that its outlook was backed by a strong pipeline and solid tech spending.

According to database StarMine, SAP trades at 16.9 times estimated 12-month forward earnings, a premium to rival Oracle, which is valued at 14.7 times.

Microsoft is also scheduled to publish earnings on Thursday.

(Reuters)