SAP's growth rate on target

SAP's growth rate is right on target for 1998.

The German software giant announced today preliminary results for the first nine months of 1998 which show revenue increasing 54 percent to $3.6 billion from last year's like period. Third quarter revenue was also up, about 43 percent to $1.2 billion from the third period last year, "despite an ongoing economic crisis in Japan, as well as unfavorable exchange rates," SAP executives said in a prepared statement.

Profits for the period were up slightly more than revenue, SAP executives said. They also said the preliminary results support earlier predictions about year-end growth rates.

"SAP's board maintained its earlier expectations for 1998 of approximately 40 percent revenue growth and a 30 percent to 35 percent increase in pretax profits," executives stated.

While still healthy, the growth rate is about 20 percent lower than SAP's growth the past few years. The economic crisis in Japan and a general slowdown in the market, analysts said, are two reasons that enterprise resource planning vendors are experiencing lower growth.

But it was a slow down that was expected and needed for the industry. Many analysts were predicting that the rapidly growing market would have to reach critical mass at some point and growth drop to a more manageable and realistic level.

As a result, Wall Street has reacted by downgrading the stock for most of the enterprise resource planning firms.

Goldman Sachs, Morgan Stanley, and BT Alex Brown are among the investment firms that have reduced enterprise resource planning stock ratings. But that doesn't mean the firms aren't still fond of enterprise resource planning companies. They just see the market becoming much more stable and the runaway growth of the early 90s coming to an end.

"Despite formidable near- to intermediate-term risks, the ERP sector remains a huge market with good growth prospects, in our opinion," BT Alex Brown stated in recent report. "The long term growth prospects for ERP are still exemplary by most standards. The key, in our view, is to focus on stock selection."

SAP's final results will be announced October 20.

In other earnings news, financial software maker Clarus Corporation, formerly SQL Financials, announced for the quarter ended September 30 revenues of $11.9 million a 57 percent leap from the $7.6 million earned the same quarter of 1997. Clarus had net income of $1.1 million compared to profits of $40,000 the like quarter last year, and operating income of $947,000 compared to an operating income of $305,000 in the same third quarter of 1997. Diluted net income per share was 11cents compared to 1 cent for the same quarter of 1997.