SAP Meets First Quarter License Expectations; Profit Misses
Germany's SAP met analysts' forecasts for sales of new software licences but missed expectations for earnings after a difficult first quarter in which it lost a top manager and faced a lawsuit from a rival.
The world's biggest maker of business software said on Friday licence sales, which hook customers into lucrative maintenance and service deals, rose 10% to 564 million euros ($767 million) in the three months to end-March. The average estimate in a Reuters poll of 24 analysts was 564 million euros.
Operating income rose 6% to 433 million euros, missing the Reuters poll average of 448 million as SAP started to invest the 300-400 million euros it plans to spend on developing new software for smaller companies.
SAP, whose software helps companies manage their finances, personnel and operations, said business grew strongly in both the United States, the world's biggest software market, and Europe. It stuck to its full-year targets.
Computer services giant IBM said this week that spending on software and services was strong in Europe, especially in Germany.
"We are pleased with our first quarter results," SAP Chief Executive Henning Kagermann said in a statement.
"On a constant currency basis, we achieved a strong increase in software and software related service revenues and reported double digit growth rates in each region," he said.
Software and software-related service revenues, which SAP says will become the key figure to watch as it starts to sell software over the Internet and by subscription, rose 9% or 15% at constant currencies to 1.52 billion euros.
SAP has targeted a 12 to 14% currency-adjusted increase in software-related revenues for the full year. The first-quarter result was in line with market consensus.
Total sales rose 6% to 2.17 billion euros, missing market expectations, and net profit rose 10 percent to 310 million. The operating margin, which SAP says will dip to 26-27% this year, was 20.0%.