SAP catches the Asian flu
Announcing preliminary results for the first half of 1998, SAP says the Asian economic crisis is having a "greater than expected effect on performance."
Announcing preliminary results for the first half of 1998, German software titan SAP said today the Asian economic crisis is having a "greater than expected effect on performance in the quarter."
"Revenues for the Asia Pacific region in the second quarter were below last year's level due mainly to exchange rate movements, and to downsizing in investments and software implementation projects in the region, including Japan," SAP executives said in a prepared statement.
SAP's shares dropped after the news, taking the rest of the German market with it. SAP shares fell as much as 10.17 percent after the announcement. The German market benchmark DAX index fell 1.01 percent to 5,935.91 points. Beginning August 3, SAP shares, which currently trade on the German market under the stock symbol SAPHY, are to be traded on the New York Stock Exchange.
Traders said that SAP's admission shattered hopes that the software maker would exceed its full year profit forecast of between 30 and 35 percent growth.
"The problem is that those goals are now looking realistic," one trader said. "Up until now all the analysts have been saying they would do much better than that."
Still, SAP said preliminary results show that revenues for the first half of 1998 were greater than expected, growing by about 60 percent. The company also added about 66 percent in new costs during the period, mainly from adding new employees to fuel its growth. As a result, pretax profits rose about 40 percent.
Full results are to be released on July 20.
Reuters contributed to this story.