January 13, 2012 4:45 pm

SAP bucks pessimism with record results

SAP defied fears that cautious businesses might slow investment in new software when the German company posted record fourth-quarter and full-year results that exceeded analysts’ forecasts.

SAP, the world’s biggest maker of business software by sales, boasted that it was outperforming and gaining market share from its competitors after fourth-quarter operating profit rose 10 per cent to €1.78bn, excluding exceptional items, including a one-time litigation effects. This beat a €1.65bn consensus estimate compiled by Thomson Reuters StarMine.

Software revenues – a closely watched metric of future performance due to the tendency of customers to enter lucrative, long-term service contracts – were 16 per cent higher at €1.7bn. Total revenues increased by 10 per cent to €4.5bn.

The shares surged 3.8 per cent to €43.04 on Friday, when most German blue-chips were trading in negative territory. The figures are preliminary and are not based on international financial reporting standards.

Bill McDermott and Jim Hagemann Snabe, co-chief executives, said in a statement: “In an uncertain environment, SAP delivered the best year in its 40-year history. We gained significant market share and achieved double-digit growth across all regions.”

Last month Oracle, SAP’s big rival and a bellwether for tech corporate and government tech spending, sent shivers through the business software sector when it warned that sales growth unexpectedly slowed and earnings fell short of forecasts.

Software AG, Germany’s second-biggest software company by sales, added to spending worries this week when fourth-quarter sales and profit missed estimates, sending its shares spiralling 20 per cent lower.

SAP has remained bullish on corporate tech spending in recent months. The company is banking on growing demand for new products in mobile, cloud and so-called “in-memory” computing that allows clients to quickly analyse huge quantities of data.

The company said on Friday that it had recorded €160m in sales of its HANA “in-memory” technology platform, exceeding a €100m target.

“Oracles’s figures led to scepticism in the marketplace [about whether] SAP could achieve these kind of results, which explains the share price increase,” Mirko Maier at Landesbank Baden-Wuerttemberg said. “It’s also pleasing to see HANA and SAP’s mobile business having a bigger impact in their first year than many people expected. The most important thing to watch for now is SAP’s outlook for 2012.”

SAP last month said it would buy Success Factors, the provider of cloud-based human resource management software, for $3.4bn in an effort to strengthen its ability to provide software to companies over the internet, which is considered a key industry growth area.

The company’s full-year revenues rose by 14 per cent to €14.3bn, while software and software-related serve revenue climbed by 17 per cent to €11.4bn at constant currencies, exceeding the company’s guidance for an increase at the upper end of a 10-14 per cent range.

SAP is due to report final fourth quarter and full-year figures and its outlook for 2012 on January 25.

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