SAP sales beat expectations

Full-year sales and earnings drop but revenue manages to beat expectations, as higher software sales are forecast for 2010.

Although SAP ended a tough 2009 with lower sales and earnings, key results actually beat expectations in the final quarter, paving the way for stronger growth in software revenue this year.

For fiscal 2009, the German software company on Wednesday reported sales of 10.67 billion euros ($14.9 billion), 8 percent lower than the 11.56 billion euros from 2008. Earnings dropped 4 percent to 1.78 billion euros from 1.86 billion euros for the prior year.

For the fourth quarter ending in December, SAP took in sales of 3.18 billion euros, a 9 percent decline from 3.48 billion euros in 2009's final quarter. Quarterly income fell from 830 million euros in the prior-year quarter to 727 million euros, a 12 percent drop.

Despite the downturn, overall fourth-quarter sales and especially those from software-related services beat estimates from both the company and analysts. Operating margins for the full year also were better than expected. SAP attributed the improvement in part to cost cuts and layoffs it had announced earlier in the year.

"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," said SAP Chief Financial Officer Werner Brandt in a statement. "I am pleased to report that we exceeded our initial expectations."

An improvement in fourth-quarter revenue also opened the door for the higher sales growth expected in 2010. SAP forecast that sales from software and software-related services should grow between 4 percent and 8 percent this year. The company has promised to continue to keep a tight rein on expenses but at the same time focus on its core business and introduce new products to the marketplace.

A number of deals set up in 2009 should also bode well for the year ahead and beyond. In the fourth quarter, SAP closed key contracts with several major customers, including Pfizer, Verizon, and Sybase. In December, the company signed an agreement with Deutsche Bank to provide software based on SAP's banking product. The same month, SAP set up a deal with Valero Energy to further integrate its enterprise software across Valero's offices and oil refineries.

But coming off a difficult 2009, SAP cautioned against expecting a quick, full recovery.

"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," said SAP Chief Executive Officer Leo Apotheker.

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