What's Behind SAP's Change in Outlook?
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Battered by its highly expensive lawsuit with Oracle and shaken by the uncertain economy, German software giant SAP has pulled its guidance for 2009 and taken a step back in its predictions for the rest of 2008.
During the company's third-quarter earnings call this week, co-CEO Henning Kagermann blamed the uncertain market and reduced customer spending for the pullback.
"The economic and business environment is uncertain," Kagermann said in a statement, adding that SAP has "been through uncertainty before, and has always emerged as a better, stronger and more efficient company."
The news was not unexpected, as SAP (NYSE: SAP) had earlier this month given a sneak preview of its earnings in a hastily arranged call, during which it said third quarter revenues fell below expectations largely due to the global credit crunch. That news saw SAP shares fall 13 percent to close at $39.68.
SAP is not alone in its cautious approach to providing guidance for 2009. Microsoft (NASDAQ: MSFT) expressed concern about the economy during its earnings call last week, although it still said that it would outperform the market. Oracle, too, warned about the weak economy going forward during its earnings call last month.
Both SAP and Microsoft have said they'll tighten their belts, cutting or controlling spending and trimming hiring plans, although Oracle (NASDAQ: ORCL) did not.
Overall, the outlook for the IT industry will remain grim, especially in developed countries, and industry researcher Gartner has forecast that IT spending will go up by 2.3 percent next year, less than half its earlier projection of 5.8 percent.
SAP shares closed at $32.04 on Tuesday, up 1.65 percent from its open on Monday, ahead of the news.
Earlier today, SAP also announced a deal to resell ClickSoftware's ServiceOptimization Suite, rebranding its partner's solution as the SAP Workforce Scheduling and Optimization application by ClickSoftware. The suite is designed to help businesses manage their field service.