SAP sees a silver lining on sales

SAP, the world’s largest maker of business software, offered a glimmer of hope that companies may be regaining confidence and investing again when it said software sales last year were not as sluggish as expected.

But customer resistance saw the German group back down from a proposed increase in maintenance fees, a move that would add to revenue pressures. SAP said it would present a forecast for 2010 at the end of the month.

The company said that sales of software and related services such as online subscriptions decreased 5 per cent to €8.2bn ($11.9bn) in the last three months of 2009, outperforming a drop of 6-8 per cent forecast in October.

SAP’s preliminary full-year result was a second piece of good news for the information technology industry – seen as a bellwether of the mood in corporate boardrooms – after US software maker Oracle reported an unexpected sales rise last month.

Both companies were hard hit when corporate clients slashed software spending at the end of 2008 – and SAP was cautioning the market remained tough only three months ago.

Léo Apotheker, SAP’s chief executive, responded by reining in costs, a strategy that seems to have borne fruit, as SAP said its operating margin at constant currencies was 27.2 per cent, 0.2 points above its target. But his other big initiative, raising annual maintenance fees from 18 per cent to 22 per cent of software-purchase costs, could only be implemented in part as clients – mainly in Germany – balked at the increase.

SAP will offer customers the choice between a standard maintenance service at 18 per cent and a more inclusive one at 22 per cent, an approach Mr Apotheker deemed “the right thing to do in the current environment”.

“The altered maintenance offering ... curbs upside [on sales] as we expect most customers will return to standard support,” warned Thomas Becker, a Commerzbank analyst. He also warned the effects of cost cuts could diminish.

SAP’s better-than-expected results made the stock price jump more than 4 per cent to levels not seen for more than year. However, the share price closed 1.7 per cent higher at €35.27 after investors took note of the maintenance fees issue.

In the last three months of the year sales – calibrated using methods not in accordance with US generally accepted accounting principles, which SAP says reveal more than GAAP figures – fell 5 per cent to €2.56bn.

Revenues calibrated using GAAP rules decreased 4 per cent to €2.56bn, while core software sales without subscriptions, which have traditionally provided a measure of future services revenues, fell 16 per cent to €1.1bn.