SAP AG led the German market higher on Friday after coming in with results that dramatically beat its own forecasts, with net profits for 1996 up 40% at the equivalent of $346m on revenue that rose 38% at $2.27bn. Trading heavily through the day, SAP’s preferred shares ended up nearly 11% at 246 marks after soaring as high as 13% up at the opening – and they had actually fallen 6% on Thursday, on worries about the report. The concern was that in October, the company had warned that profit and sales growth unexpectedly slowed in the third quarter. The 40% growth in profits was in line with its original forecast for the year rather than the revised 30% it was touting in October. DG Bank forecast SAP’s 1996 net income would rise to just under $300m, indicating even slower growth than the 30% rate SAP predicted, but it was wildly confounded. The company explained its rather embarrassingly misleading guidance to the markets by saying The planned currency union and the turn of the century have increased interest in our products worldwide. Sales of the R/3 product rose 44% to $1.44bn while consulting revenue increased 47% to $448m. Foreign sales contributed 75% of the total, up from 69% in 1995. Within that, Asian sales rose 67% to $296m and American sales were up 47% to $823m. European sales were much less robust, and rose only 27% to $1.10bn. SAP also said sales could rise another 25% to 30% in 1997, but we all now know that taking much notice of its forecasts is like taking a tip on a horse race from a jockey – jockeys are notoriously bad tipsters. Fourth-quarter pre-tax profit rose 58% to $278m, and earnings per share for the year rose 37% to $3.34. SAP signed on 1,089 new R/3 customers in 1996, bringing worldwide installations of the client-server software to over 9,000. In December it began shipping R/3 Version 3.1, which includes Internet capabilities. At the end of 1996, SAP employed 9,196, a rise of 34% on 1995.
