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SAP profits fall in "challenging" quarter

The business software giant says profits fell following a quarter that included higher business costs and tighter market competition.

Business software giant SAP today said profits fell following what executives called a "challenging" quarter that included higher business costs and tighter market competition.

The German software maker said net income fell 43 percent to 56 million euros ($53 million). Pretax profit, including costs of SAP?s Star employee benefits program, fell 45 percent to 95 million euros ($90 million).

For the quarter, revenue rose 10 percent to 1.18 billion euros ($1.12 billion).

Last week, the company warned earnings would come under pressure as costs for SAP?s benefits program and its e-business project,, increased.

"SAP was prepared for a challenging first quarter, and we got it," SAP chief executive Henning Kagermann said in a statement, adding that the company was "satisfied" with the quarterly numbers. "Competition for Web-based products, particularly in the United States, has been fierce."

Kagermann added that SAP expects stronger software sales in the next two quarters.

SAP competes in the enterprise resource planning (ERP) market against U.S.-based companies Oracle and PeopleSoft, and European company Baan.

For the first quarter, revenue from product sales rose 15 percent in Europe, the Middle East and Africa, and rose 40 percent in the Asia-Pacific region. However, sales to the Americas fell 3 percent from year-ago levels.

SAP said the bulk of revenue growth came from maintenance, where revenues were up 43 percent from a year ago. Software license sales, however, grew just 4 percent, with the business-to-business product contributing 80 million euros ($75.6 million) to the company?s overall revenue for the quarter.

SAP, like most of its competitors in the ERP market, has increased its efforts to gain a share of the lucrative business-to-business e-commerce market. Analysts predict the value of the market will surpass the trillion-dollar mark by 2003.