SAP 3Q profit down, company cuts '08 outlook

FRANKFURT, Germany - Software maker SAP AG said Tuesday its third-quarter profit fell 5 percent on costs relkated to an acquisition. The company cited the shaky global economy in cutting its forecast for an important measure of profitability for the full year and for abandoning a key revenue forecast.

The world's largest producer of business-software applications said its profit fell to 388 million euros ($485 million) for the July-September period from 408 million euros a year earlier. Operating profit rose by only 1 percent to 614 million euros ($768 million) from last year's 606 million euros.

SAP said its earnings were impacted by one-time costs related to the $6.8 billion acquisition of Business Objects SA, a Paris-based software company.

Total revenues rose 14 percent to 2.8 billion euros ($3.5 billion) from 2.4 billion euros. Software and software-related service revenues rose 15 percent to 1.99 billion euros ($2.5 billion) from 1.74 billion a year ago.

SAP said in a statement that it would reduce its full-year outlook for operating margin — a measure of a business's profitability — because of the "uncertain economic situation."

The margin edged up to 26 percent in the third quarter from last year's 25.8 percent.

SAP said in July that it expected its full-year operating margin to hit the upper end of a 28.5-29 percent range. However, it said it now expects a margin of 28 percent — and only if it can increase software and software-related service revenues.

SAP abandoned its July forecast that growth in those revenues would hit the upper end of a 24-27 percent range.

"In light of the uncertainties surrounding the current economic and business environment, the company decided to no longer provide a specific outlook for software and software-related service revenues for the full-year 2008," it said.

Shares of SAP fell 3 percent to end at 23.70 euros ($29.67) in Frankfurt, where the DAX index was up strongly overall.

Walldorf-based SAP makes programs that help companies do back-office work such as payroll, inventory management and accounting.

Co-Chief Executive Henning Kagermann said that "we are assessing business activity continuously, and we are balancing the need for greater efficiencies with steady advancements in our products, customer services and technologies, while addressing customers' most critical business issues."

"This approach has worked well for customers and SAP throughout the up and down economic cycles of the past," Kagermann said. "We've been through uncertainty before, and have always emerged as a better, stronger and more efficient company."

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