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SAP surprised investors on Wednesday by cutting its full year sales outlook on a weak performance in emerging markets and Japan, just as rivals had given cause for hope that tech spending was on the rise.
The German business software specialist's Chief Executive Leo Apotheker, who until June shared the job with Henning Kagermann, told Reuters TV he was nevertheless confident for the current quarter.
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AP SAP Headquarters |
"Q4 will be our largest quarter by far... but it is a very peculiar year and it is a very hard year to predict and I want to be very prudent in giving a realistic guidance about Q4," Apotheker said.
The industry is desperately seeking signs that corporate spending is on the mend after many firms held back big-ticket software projects during the economic slump and turned to outsourcing to save costs.
Recent results by major players such as Intel, [INTC
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] Microsoft, [MSFT
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] VMware and Tibco, [TIBX
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] which beat expectations, have cheered investors.
But SAP's fiercest rival Oracle's quarterly software sales missed expectations last month, dampening hopes that companies were starting to loosen the purse strings.
Shares in SAP, [SAP
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] the world's biggest maker of business software, were down 6.8 percent at 32.06 euros, after the company reported worse-than-expected quarterly results, while Germany's blue chip index was down 1.1 percent.
SAP, which was founded in 1972 in Walldorf near Heidelberg, said it now expects its 2009 software and software-related sales to decline by between 6 percent and 8 percent.
Previously, it said it saw a decline between 4 percent and 6 percent.
"While we are seeing signs of stabilization in the general environment, the market remains difficult," Chief Financial Officer Werner Brandt said in a statement.
"Third quarter software and software-related service revenues came in lower than we expected mainly because of a particularly challenging environment in the emerging markets and Japan."
SAP still expects its full-year 2009 operating margin, excluding one-off items, to be in the range of 25.5 percent to 27.0 percent at constant currencies.
"Due to the favourable tax rate, earnings estimates should remain stable. But overall, the third-quarter results did not deliver the trigger for a positive earnings upward revision that we hoped for," said UniCredit analyst Knut Woller.
Virtualization Threat
SAP's third-quarter software and software-related services revenues were 1.94 billion euros ($2.9 billion), down 5 percent, and earnings before interest and taxes fell 8 percent to 674 million euros compared with the previous year.
Analysts polled by Reuters had forecast a 1.5 percent rise in third-quarter operating profit to 742 million euros.
Companies have reined in IT spending during the financial crisis. According to a UBS study, overall software spending plans dropped in the third quarter from the second, and IT budgets for the coming 12 months are seen down slightly year-on-year.
The UBS report also showed that corporate IT buyers are increasingly interested in Microsoft, which has just launched Windows 7, and VMware's virtualization technology, where SAP has no significant offering.
Oracle said last month that sales of its No.1 selling database program in Europe and Asia were weak because companies were not investing in business management software projects.
The U.S. company had also said that a decline in sales at SAP was hurting Oracle's sales -- because SAP is one of the top resellers of the company's database.
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