2nd UPDATE:SAP 4Q Net Profit Up, Cuts 3,000 Jobs In "Tough" Market
January 28 2009 - 12:32PM
Dow Jones News
Business software company SAP AG (SAP) said Wednesday fourth
quarter net profit rose 13% on consolidation effects and cost
savings, boosting its shares, but said it will cut 3,000 jobs as it
continues to control costs.
Net profit for the quarter ending Dec. 31 was EUR850 million
compared with EUR752 million in the same period a year earlier.
Software and software-related service revenue, a closely watched
figure, was up 8% on year at EUR2.67 billion, while total revenue
for the period also rose 8% to EUR3.49 billion.
In common with rival firms that make business software, SAP has
experienced falling demand from customers in certain areas due to
the economic downturn. SAP said late last yearthat its business had
already been hit by the economic downturn, when third-quarter sales
missed expectations.
At that time, SAP implemented cost saving measures that paid out
in the fourth quarter, boosting the bottom line, a company
spokesman said. Net profit also benefitted from the acquisition of
France's Business Objects, which SAP acquired last January in a
EUR4.8 billion deal.
SAP shares rose as a result, closing up 5.3% at EUR27.60,
outperforming a 4.5% rise in the DAX.
"It looks like SAP delivered more cost savings than expected,"
said UniCredit analyst Knut Woller, who has a buy rating on the
share with a target price of EUR33.
SAP said Wednesday it will reduce its global work force to
48,500 from 51,500, the first time it has cut jobs. It said the
cuts would lead to annual cost savings of EUR300 million to EUR350
million from 2010. SAP expects restructuring charges of EUR200
million to EUR300 million related to the job losses.
"We believe the cost containment measures will allow us to adapt
to the tough market conditions and ensure the long term
competitiveness of the company," said SAP Co-CEO Leo Apotheker.
Walldorf, Germany-based SAP competes with Microsoft Corp.
(MSFT), Accenture Ltd. (ACN) and Oracle Corp. (ORCL), which has
moved into more direct competition with SAP following a string of
acquisitions in business software.
"Compared with its peers and given the economic downturn, SAP
could have been worse," said Gartner analyst Tim Payne.
Oracle's second-quarter revenue missed Wall Street expectations
on the strong dollar and weaker IT expenditure from its customers,
particularly big-ticket software applications. Earlier this month,
the Wall Street Journal reported that Oracle plans to cut 500
jobs.
SAP, meanwhile, said it expects to post a non-GAAP operating of
24.5%-25.5% for full-year 2009, including restructuring costs but
excluding charges related to the Business Objects acquisition, and
at constant currencies. SAP also said that outlook is based on the
assumption that non-GAAP software and software-related services
revenue will be flat or decline by 1% at constant currencies from
2008's EUR8.62 billion. SAP's 2008 non-GAAP operating margin at
constant currencies was 28.4%.
Co-CEO Apotheker said SAP retained its target to reach a 35%
margin mid-term, but didn't specify a timeframe.
Chief Financial Officer Werner Brandt said SAP doesn't intend to
resume its share buy back program in 2009, having bought back 14.6
million shares for a total amount of EUR486.8 million in the first
nine months of 2008.
Company Web site: www.sap.com
-By Archibald Preuschat, Dow Jones Newswires, +49 69 297 25 505,
archibald.preuschat@dowjones.com
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