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RealTime IT News

SAP Sees Tough Start to Year, Will Cut 3,000

German software giant SAP declined to give a specific outlook for 2009 sales and said charges for job cuts would weigh on its operating margin as it braces for a "challenging operating environment".

"We expect 2009 to be a year of limited visibility, making it increasingly difficult to project sales in this environment," Co-CEO Leo Apotheker said in a statement on Wednesday.

SAP, the world's biggest maker of business management software, gave no target for its key software and software-related sales this year but based its margin forecasts on the assumption core sales would be flat or 1 percent lower than 2008 sales worth $11.4 billion.

SAP, which implemented cost savings in October after sales dropped sharply, said it would continue to slash costs and announced it intended to reduce its workforce to 48,500 by the end of this year from 51,800 now.

Apotheker told Bloomberg television that SAP was still seeing demand for software despite the global economic slump and that it intended to avoid forced layoffs.

Many technology companies are cutting workers, among them SAP's closest competitor, Oracle (NASDAQ: ORCL).

SAP said it expects the staff reductions to result in annual cost savings worth $398 million to $464 million beginning in 2010, but also in restructuring charges this year in a range of $265 million to $398 million.

That would weigh on its 2009 operating margin by 2 percentage points to 3 percentage points, the company said. It forecast an operating margin of 24.5 percent to 25.5 percent versus 28.2 percent last year.

Its shares were indicated 0.4 percent firmer before the German market was to open at 0800 GMT.

DZ Bank analyst Oliver Finger called the news on job cuts positive and said 2008 figures were better than expected.

SAP said 2008 operating profit rose 4 percent to $3.75 billion and total software and software-related sales gained 14 percent to $11 billion.

The sales number was exactly in line with the average in a Reuters poll of analysts.

Operating profit in the fourth quarter rose a better-than-expected 15 percent to $1.6 billion and software and software-related sales were $3.5 billion, up 8 percent.

U.S. rival Oracle in December posted second-quarter results that were better than feared and gave investors reason to hope that Oracle would manage the economic slowdown relatively well.

SAP is valued at around 13 times estimated 2009 earnings compared with a sector average of 11, according to Reuters data.