Last updated: July 12, 2012 11:10 pm

SAP reports strong software sales

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Second-quarter sales at SAP exceeded market estimates, helping reassure investors that the German business software maker’s recent rapid growth has not yet succumbed to a global economic slowdown.

SAP’s software revenues jumped by a currency-adjusted 19 per cent to €1.06bn in the three months to June 30, reaching the upper end of its forecast of 15-20 per cent growth. SAP recorded double-digit sales gains in all regions, including Europe.

Analysts had predicted €977m in software sales, according to an estimate compiled by Bloomberg. Software sales are seen as a key indicator of the business’s underlying health due to opportunities for future service-related business.

The stock had traded 3 per cent lower during Thursday morning after Infosys, the Indian software group, cut its sales forecast. But SAP’s stock surged after releasing the confidence-boosting preliminary figures and traded 4.8 per cent higher at €48.48 by mid-afternoon, to close up 2.7 per cent at €47.50.

“The results came in at the upper end of our second quarter software revenue guidance in an uncertain macroeconomic environment,” Bill McDermott and Jim Hagemann Snabe, co-chief executives, said in a statement.

In spite of worries over the global economy, many companies continue to invest in software in a bid to cut costs and improve productivity.

Oracle, SAP’s biggest rival, reported strong software sales growth last month when it announced fiscal fourth-quarter results.

However, weaker guidance from the likes of Infosys, Infineon Technologies, the chipmaker, and Informatica, a data integration company, has shaken investor confidence in recent weeks.

SAP suffered a rare blip in the first quarter when its US sales model led to disappointing earnings. It reassured investors at the time that the problems were localised and issued bullish second-quarter guidance.

In order to drive growth SAP is investing in new areas such as the cloud – the remote provision over the internet of software as a service – mobile and in-memory database computing.

SAP’s Hana’s in-memory product allows customers to analyse vast amounts of data much more quickly. Analysts at Bernstein Research last month dubbed it a “disruptive technology” that “could change the way data [are] analysed and used”.

SAP expanded its cloud activities in May by agreeing to acquire Ariba, a business-to-business ecommerce network, for $4.3bn. In December the German company paid $3.4bn for SuccessFactors, a provider of online tools for managing employees.

Second-quarter operating profit rose 8 per cent to €1.2bn while total sales jumped 12 per cent to €3.9bn. These figures are at constant currencies and are not according to international financial reporting standards. The company is set to report full results on July 24.

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