SAP Profits, Sales Slip in 4Q
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German software giant SAP on Wednesday posted a profit of 727 million euros ($1.02 billion) on sales of 3.19 billion euros, in line with its preliminary guidance but still disappointing compared to the relatively robust results offered by other tech luminaries in the past month.
The 3.19 billion euros in sales represents a 9 percent decline from the year-ago quarter when it earned 830 million euros on sales of 3.49 billion euros.
"As a result of a very difficult and unstable market environment that began in the third quarter of 2008 and then continued into 2009, we rapidly put into place a plan to reduce operating expenses in order to protect our operating margin," CFO Werner Brandt said in a statement.
More distressing for SAP and its shareholders, the company's software and software-related services sales dipped to 2.57 billion euros, down 4 percent from the 2.66 billion it recorded in the fourth quarter of 2008. And software sales were off 15 percent to 1.12 billion, compared to 1.32 billion euros.
SAP (NYSE: SAP) shares fell $0.04 to $46.01 a share in early Wednesday trading.
SAP's lackluster results pale in comparison to archrival Oracle (NASDAQ: ORCL) which easily topped analyst estimates in its most recent quarter.
Oracle, which claimed it continued to take share from SAP in several industries, posted a profit of $2 billion, or $0.39 a share, excluding special charges, on sales of $5.9 billion, well above the $0.36 a share consensus target.
It also managed to garner at 2 percent increase in new software sales, compared to a the 10-percent decline it had originally forecast.
SAP's guidance for 2010 is better, but certainly not awe-inspiring.
Company officials said it expects software and software-related service revenue to increase between 4 percent to 8 percent in 2010, with operating margins in the range of 30 percent to 31 percent compared to 27.4 percent in 2009.
"Along with margin expansion for 2010, we are also ready to return to top-line growth, although the market continues to be challenging and uncertainty among customers still exists," CEO Leo Apotheker said in the statement.
Analysts had forecast an average of 7.6 percent revenue growth for the year and operating margins of 31.8 percent, a tad better than the outlook provided Wednesday.
"We are relieved the margin guidance is implying an improvement year-on-year, but this is balanced by slightly soft top-line guidance," Mark Bryan, an analyst at Deutsche Bank, wrote in a research note following the earnings report.
Coincidentally, SAP also announced Wednesday that it will be replacing Deutsche Bank's core banking software system over the course of the next few years. The implementation will update DB's account management, payments, partner data and savings applications.
Nine of the 15 analysts tracking the stock maintain either a "hold" or "neutral" recommendation. Two analysts rate it a "strong buy" while three others are advising clients to sell the stock.