SAP AG on Tuesday reported a 7% dip in second-quarter earnings and 4% decline for the first half, even as revenue rose 13% and 17%, respectively. The ERP software giant posted net income for the quarter of 142m euros ($147.7m) on revenue of 1.26bn euros ($1.31bn). For the half, net income was 240m euros ($249.6m) on revenue of 2.34bn ($2.43bn). The results for the half came as a slight disappointment to general market expectations of 19% revenue growth and a 2.5% dip in pre-tax profit – which was actually down 5% year-over-year at 420m euros ($436.8m). SAP says sales for the first half would have risen 19% from last year were it not for the net effect of currency exchange.
Product revenues rose 4% to 1.35 bn euros ($1.4bn) in the first half but were weighted down by anemic software sales that dipped 3% to 1.08bn euros ($1.12bn). Product revenues accounted for 58% of total sales, compared to 65% in the first half of 1998. Within the product segment, service-related maintenance revenues grew 42% to 272m euros ($282.9m). Consulting revenues, meanwhile, rose 57 % to 741m euros ($770.6m) and training revenues grew 9% to 216m euros ($224.6m).
The company said sales in Europe, the Middle East and Africa showed the strongest growth in the first half with an increase of 25% to 1.15bn euros ($1.2bn). Americas revenues rose 11% to 969m euros ($1.01bn) and Asia-Pacific sales were up 5% at 214m euros ($222.6m). Despite the bottom line disappointment, the company insists it was pleased with the performance in Europe and maintains that its increasing focus on customized offerings and cost controls initiatives should allow it to achieve 1999 targets which call for revenue growth of 20%-25% and earnings growth of more than 20%.
SAP, like many other ERP vendors, has longed blamed flagging software sales on the Y2K issue. The company’s slow move toward the internet market has also been criticized and it has been dogged by product delays in other areas. But management insists that hopes are high for the launch of the internet-based mySAP.com offerings due out in the second half as well as increased demand for R/3 and New Dimension products as the Y2K issue recedes.
