German Tech Firm Rises Less Than Expected, Due To Asian Chill
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German company SAP (Systems, Applications and Products in Data Processing), a global provider of client/server business applications, raised the curtain for a preview of its 1998 figures this week, with sales less than expected.
While official publication is scheduled for January 26, SAP revealed a sales increase of 40 percent up to DEM 8.4 billion ($5.3 billion). However, pre-tax results for the year were 15 percent below expectations, largely due to an ongoing decline in the Group's Japanese business.
Q4 pre-tax profits were negatively affected by a software revenue shortfall of around DEM 200 million ($125 million) in Japan. As a result of the decreased activity levels and more protracted market stagnation, SAP has begun re-organization of its Japanese business.
Pre-tax results were also adversely affected by the instability of the Russian market, where the company has switched to business on a cash basis. This has meant a drop of DEM 40 million ($25 million). However, business in key American and European markets was up by 50 percent and 40 percent respectively.
The board expects 1999 revenues to increase between 20 and 25 percent with a pre-tax profit margin improving slightly over 1998.
The Japanese chill was expected. It was nevertheless a severe one and it is significant that its extent should only have become clear at the end of the business year. This should be a warning to the board that its perception of developments left something to be desired. Return on sales was down from a gross 27 percent to 23 percent.