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SAP 1Q Net Profit Falls 16 Percent To Euro204 Million

The Associated Press

FRANKFURT (AP) — German software company SAP AG said Wednesday that the company's first quarter net profit fell 16 percent because of factors including lower software revenues as businesses cut back purchasing in the recession, and on charges from staff reductions.

The Walldorf-based company said net profit in the January-March period fell to euro204 million ($269 million) from euro242 million in the first quarter a year ago.

Sales for the period were also 3 percent lower at euro2.4 billion from euro2.46 billion.

"Due to the continued uncertainty surrounding the economic and business environment, SAP will not provide a specific outlook for software and software-related service revenues for the full-year 2009," the company said in its report.

Germany's largest software company said it saw euro160 million in restructuring charges resulting from work force reductions during the period. It said those charges are expected to amount to between euro200 million and euro300 million for the year.

The company said software related service revenues were flat at euro1.74 billion, while software revenues alone decreased 33 percent to euro418 million from euro622 million in the first quarter of 2008.

"While visibility for software revenues remains limited, we continue to take the necessary steps to protect our margin in this tough operating environment," said Leo Apotheker, the co-chief executive of SAP.

"The cost containment measures that we initiated in October of last year and carried into the first quarter of 2009 have really taken hold, and we are pleased with the resulting margin performance. We will continue to maintain tight cost controls," Apotheker said.

The company warned that the second quarter would be difficult to compare to the year-ago quarter because of strong results in 2008 — prior to the economic crisis which disrupted global markets, and caused a sharp drop in software product sales.

SAP said it will continue with the cost saving measures that it initiated in October 2008 and will take further steps to reduce expenses, including maintaining tight cost controls on all variable expenses, including third-party related costs, as well as capital expenditures.

"While SAP's first quarter results missed consensus expectations on the top line, they exceeded expectations on the bottom line," UniCredit analysts said in a note to clients. "SAP's maintained full year outlook, ... should give the market confidence in the full year earnings estimates."

Shares of SAP closed down 2.1 percent at euro29.50 in Frankfurt.

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