German ERP giant SAP’s stock price closed down 16.81% to 287 euros ($338.95) on the Frankfurt stock exchange yesterday after the company made a preliminary results announcement, revealing profit growth for 1998 well below its own forecasts, as well as market expectations. The company said that, while it expects to report revenue growth of 40% when it publishes the definitive figures at the end of this month, profits would be up no more than 15%, where it had previously been expecting growth in the 25%-35% range. The company blamed this primarily on Japanese results that were far below its expectations, with a revenue shortfall of some $120m. In addition, say market analysts, the company’s results are now reflecting the downturn in demand for year 2000-compliant systems, as more users have already installed them, while others are now freezing investment in new systems until after the event. The latter factor, known as the ‘Nuclear Winter’ for ERP vendors, was alluded to last month by Oracle’s chief operating officer, Ray Lane. He commented, with regard to SAP’s increasingly aggressive pricing and sales tactics, I don’t know if I want to use the word desperate … but something’s not right, while Baan just kind of evaporated – I have not seen Baan this quarter. SAP said it had hired around 6,500 new employees worldwide in 1998, a move designed to help the company meet its goal of doubling revenues over the next three years. Directors expect 1999 revenues to increase between 20% and 25% with pre-tax margins improving slightly over 1998.
