German enterprise resource planning software developer, SAP AG registered a 15% drop in its pre-tax profits for the fourth quarter of 1998, which it attributed to a suspension of IT purchasing decisions in Japan in the lead-up to the millennium change. SAP director Henning Kagermann said that, had the company not suffered a $119m shortfall in revenues in Japan as a result of this problem, it would have been able to report revenues up 27% for the quarter and profits up 17%. Without the Japanese factor, we would have achieved our target for the year, he noted. He added that, while revenues were down 5% in Asia as a whole, with Japan leading the way on the reduction, they were up 52% in North America and 4% in Europe. For the year as a whole, the company reported an increase of net profits of 13.7%, to $627m, on revenues that were up $5.05bn. The operating profit was up 17.4% for the year, while the pre-tax profit grew 15%. The reasons for profits not to have grown as much as revenues are several. First there was the 51% increase in costs, caused primarily by a 50% increase in staff, with 6,300 new employees joining the company during the year. There was also the fact that average per-user prices dropped during the year, something that CEO and co-chairman Hasso Plattner attributed to a change in the nature of sales to big corporate customers. He explained that, in many cases, these corporates are now in the ‘second wave’ of deployment, extending access to the SAP platform to a larger number of users in their organizations. Since a lot of these new users are what the company terms occasional users, it charges a lower price, which drives the average price down, but increases the overall number of people accessing SAP around the world. He said that this trend will continue as the company rolls out EnjoySAP, the ‘lighter’ version of its software due out later this year. On the positive side, SAP reported a two percentage point growth in ERP market share in 1998, reaching 59%, and it expects to see its share continue to rise in 1999, according to Plattner. Kagermann meanwhile predicted a 20%-25% growth in revenues for this year, while he expected pre-tax profits to be up by around 1%. The stockmarkets responded positively to SAP’s figures, its stock closing up 5.39% at 313 euros ($369) on the Frankfurt stock exchange.
