U.S. News

SAP Tops Profit Target, Expects Drop in Margin


German business software maker SAP reported fourth-quarter profit and revenues that beat the market's expectations Wednesday. The company also predicted a rise in software revenues this year, but said margins would fall.

SAP reported fourth quarter net income of 799 million euros ($1.04 billion), or 0.66 euros a share (86 cents a share), up from 619 million euros ($805 million), or 50 euros a share (65 cents a share). Excluding one-time items, SAP reported a porfit of 0.62 euros, or 81 cents a share. Analysts surveyed by Thomson Financial predicted a profit of 78 cents a share.

SAP Earnings

Total revenues climbed 7% from the same quarter a year ago to 2.95 billion euros ($3.84 billion). Analysts predicted total revenues of $3.8 billion. Software license revenues came in at 1.3 billion euros ($1.7 billion).

On Jan. 11, SAP warned that licenses for its corporate software packages, which are a leading indicator of growth, climbed 7% instead of the 9% previously expected for the quarter. The stock dived 10% on the news.

Looking ahead, SAP said it expected operating margin in 2007 to dip to 26% to 27% from 27.3% in 2006. Software revenues are predicted to rise 12% to 14% this year.

The stock fell 5.5% on disappointment about the margin forecast.