SAP posts hike in third quarter revenue and profit

SAP, the world's largest business-management software developer, has reported a third-quarter rise in revenue and net income,...

SAP, the world's largest business-management software supplier, has reported a third-quarter rise in revenue and net income, boosted by strong sales in Europe, Middle East and Africa and continued growth in the US.

Software revenue rose 13% to €491m (£339m) from €433m in the same period the year before. At constant currencies, software revenue increased 17% year-on-year.

Third-quarter software revenue in what is SAP's largest sales region, soared 24% to €249m, from €201m the year before. SAP won several European contracts in the quarter, including Hypo Real Estate Bank, InBev and GE SeaCo.

However, Léo Apotheker, president of global field operations at SAP, cautioned that the strong third-quarter revenue figure is compared with a relatively weak figure from the previous year and that the European sales teams continue to operate in a "very challenging environment".

Software revenue in the US market increased 6% to €149m from €140m, buoyed by new contracts from several companies including Allergan, Bose, CenturyTel Service Group and Hewlett-Packard.

However, revenue in the Americas region, including South America and Canada, dropped 2% to €173m in the third quarter, compared to €176m the year before.

"We expect to see continued growth in the US but because of competition, we expect this growth to be more balanced," Apotheker said. The software supplier posted a 63% year-on-year increase in software revenue in the second quarter.

In the Asia-Pacific region, software revenue jumped 23% to €69m from €56m. Companies placing new contracts included Adventech, Indian Oil and China National Petrochemical (Sinopec), SAP said.

Sales in China and India are growing particularly fast, with this development not expected to change anytime soon, said Apotheker.

Japan, however, continues to be a difficult market, with sales down 25% in the third quarter. "We are realigning our sales force to adjust to the changed sales climate," Apotheker said. "But we do not expect a turnaround by the end of the year, and we will have to see about next year."

Total revenue in the third quarter was up 8% to €1.8bn from €1.7bn the year before.

Net income rose 15% to €291m from €252m. Operating income was €461m, up 12% from €413m in the same period last year.

SAP's worldwide market share, according to its own estimates, grew to 56% at the end of the third quarter from 55% at the end of the previous quarter and 53% a year ago. Its US market share rose to 38% at the end of the third quarter from 37% at end of the second quarter and 32% a year ago.

"SAP continues to get stronger, with increased revenue, stronger profits and greater market share," said chairman and chief executive Henning Kagermann.

Kagermann said SAP may hire more than the targeted 2,500 people in 2004, depending on sales and product research developments. So far this year, the company has added 1,972 employees. At the end of September, it employed 31,582 people.

SAP said it continues to expect full-year 2004 software revenue to increase by around 10% compared to 2003. Looking beyond the current business year, Kagermann said he expects SAP to continue growing its software revenue licenses "by double-digit numbers".

John Blau writes for IDG News Service

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