As SAP profits fall, revenue outlook yanked

The German enterprise software titan offers investors little hope for a quick turnaround in IT spending, noting that the climate remains murky.

SAP reported its third-quarter results Tuesday, posting a 5 percent decline in earnings and nixing its revenue forecast for the year, given the uncertainty of the economic climate.

The German enterprise software maker, which reported its results prior to the market opening, saw its shares head slightly south as the morning progressed, falling to $30.02 a share, down less than 1 percent in intraday trading.

The company reported revenues of 2.76 billion euros, up 14 percent over the same time last year. Prior to issuing its third-quarter warning earlier this month , Wall Street had expected SAP to post revenues of 2.86 billion euros.

Sales of SAP's software and software-related services rose to 1.99 billion euros in the third quarter, up 15 percent over last year. And revenues of software not tied to SAP services climbed to 763 euros, a 7 percent increase. But the company's net income fell to 388 million euros, or 35 cents a share, in the third quarter, down from 408 million euros a year ago.

The company, which dealt investors a blow a couple weeks ago, when it issued its third-quarter warning and reduced its revenue forecast for the quarter, offered no reassurances to shareholders in this latest report.

In fact, SAP nixed its revenue forecast for the year--in essence yanking away investors' security blanket. Shareholders often find great comfort in the revenues and earnings forecasts that companies provide for the current and upcoming quarters.

In a statement, SAP said:

In light of the uncertainties surrounding the current economic and business environment, the company decided to no longer provide a specific outlook for non-GAAP software and software-related service revenues for the full year 2008.

However, with recent cost savings initiatives in place, the company expects the full-year 2008 non-GAAP operating margin, which excludes a nonrecurring deferred support revenue write-down of 180 million euros from the acquisition of Business Objects and acquisition-related charges, to be around 28 percent, at constant currencies, if the company can increase non-GAAP software and software-related service revenues, excluding a nonrecurring deferred support revenue write-down from the acquisition of Business Objects, in a range between 20 percent and 22 percent, at constant currencies for the full year 2008.

The current woes for SAP began in the second half of September, taking the technology titan by surprise, given the speed and depth of the cutback in customer orders.

Meanwhile, SAP's archrival, Oracle, edged up in morning trading to $15.88 a share, gaining less than 1 percent during intraday trading.

 

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