SAP lowers revenue forecast

Enterprise giant SAP has issued a warning that it is reducing its revenue and earnings expectations for its just-ended second...

Enterprise giant SAP has issued a warning that it is reducing its revenue and earnings expectations for its just-ended second quarter.

An inability to close key deals in Europe and Japan, along with year-on-year revenue declines in the America and Asia/Pacific regions has contributed to its current financial situation, SAP said. The company now expects second-quarter revenue of about €1.8bn (£1.5bn), a 4% drop from the same quarter a year ago, and operating income of approximately €326m, down 23%. SAP will release its full second-quarter results next Thursday (18 July).

SAP has also revised its full-year 2002 expectations, saying it now anticipates revenue growth of 5% to 10%, down from its earlier 15% growth projection. If market conditions remain as grim as they were in June, growth will be around 5%. With a "modest" market improvement, SAP's growth will be closer to 10%, co-chairman and co-chief executive officer Hasso Plattner said.

SAP does not plan to lay off any staff because of its reduced financial forecast. However, it will institute a hiring freeze and not fill positions vacated through attrition, Plattner said. It will also terminate some third-party services and reorganise internal projects in order to save money, he said.

"As you are aware our entire industry is facing challenging times, and SAP is no different," Plattner said.

While revenue in SAP's largest market, EMEA (Europe, the Middle East and Africa), grew 1% during the quarter, revenue in the Americas fell 12% and revenue in the Asia/Pacific area dropped 5%, SAP said.

SAP also warned that it intends to write off €318m related to its investment in Commerce One, an ailing software and services company of which SAP owns 20%. One-off charges, including the Commerce One charge, will cause a reported net loss of about €235 million for the quarter, SAP said.

SAP has previously recorded some of Commerce One's net losses on its own income statements. Taking an impairment charge this quarter will reduce the risk of further losses from Commerce One on SAP's own balance sheet, the company said. SAP's relationship with Commerce One is a significant strategic advantage, and will not be affected by the write-off, Plattner said.

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