US and emerging markets lift SAP

SAP, Europe’s biggest software group, said it was seeing strong demand from its customers in the US and emerging markets as it unveiled solid quarterly results.

A 12 per cent rise in third-quarter net profits, below expectations, and the German software group’s decision to maintain its full-year forecasts failed to excite investors. The shares were down more than 3 per cent by mid-afternoon.

Jim Hagemann Snabe and Bill McDermott have aimed to revive sales and investor and employee confidence since taking over as co-chief executives this year after Léo Apotheker was forced out.

In May, SAP acquired US database and mobile software specialist Sybase in a deal worth $5.8bn as part of efforts to offer its mainly desktop-focused products to a wider range of devices.

SAP said on Wednesday that it saw growth in all its regions during the third quarter and particular strength in the US and emerging markets.

Deal volume increased and, on the product side, business analytics “continues to be a principal growth driver”.

The 12 per cent increase in net profits to €501m ($690m) was on revenues up 20 per cent at €3bn. Third-quarter operating profits rose 16 per cent to €716m.

Revenue at software and software-related services, a key indicator, rose 20 per cent compared with the same period last year to €2.3bn.

SAP, which recently switched to reporting under international financial reporting standards, maintained its non-IFRS forecast for the year. It sees revenue from software and software-related services of 9-11 per cent for the full year and an operating margin of 30-31 per cent.

Mr Snabe said SAP’s more than 100,000 customers wanted “choice, openness and innovation” from their technology partners. “The opposite seems to be happening as more technology companies want to lock in their customers to a single vendor on one proprietary technology stack,” he said.

Thomas Otter, research director at Gartner, said: SAP appeared to be “in a holding pattern”. While the group was seeing steady growth, there was no sign of a strong pick-up. “From a morale point of view, SAP is in a much better place than it was a year ago,” said Mr Otter. “Management is very bullish about new technologies. But the test of innovation is if the market is prepared to pay for it.”

In spite of strong results from rival software groups such as IBM and Oracle, there have been concerns about the pace of recovery coming out of the economic downturn. IBM reported a rise in profits and revenues this month but disappointed by saying that the value of new service contracts signed during the quarter had fallen.

Analysts said SAP’s results showed that its co-chief executives, who took over after a turbulent couple of years at the German software group, were on the right track.

Former SAP boss Mr Apotheker, who last month was named chief executive at Hewlett-Packard, took over sole running of SAP in the summer of 2009 just as the full impact of the economic downturn hit software sales. He left after being heavily criticised for cutting jobs, increasing maintenance fees for existing customers and delays to the introduction of Business by Design.