SAP AG, the German ERP vendor, had a difficult first quarter but expects profits for the full year to be slightly above that achieved in the previous 12 months. Co-chairman Henning Kagermann said that sales growth in the first quarter will be slightly below the previous annual rate of 20% to 25% and pretax profits will fall significantly short of the comparable 1998 figure.
While SAP finds customer buying patterns are less predictable at present, Kagermann is confident that on a full-year basis they can achieve a revenue growth target of 20% to 25% as year 2000 issues abate. However, SAP’s drive down market is clearly hammering margins, at least in the short-term, if a robust annual growth rate will only produce a slight rise in profits.
SAP still plans to increase its workforce throughout 1999 but Kagermann warned that the growth in headcount will be closely linked to quarterly performance and will be substantially less than the 6,500 recruited last year.
At its annual press conference in Germany, SAP forecast that sales will double over the next three years. The company is relying on its new dimension products, which are designed to attract smaller customers in vertical markets, for much of the growth and they are expected to account for a third of product revenues in the next three to five years.
SAP is now looking for strong sales in the services sectors and is targeting public services and administration and financial markets. It is increasing its emphasis on sales through channels and says the number of new customers gained through VARs almost doubled in 1998.
