SAP increases profitability forecast despite tough Q2

SAP software revenue drops 40% in Q2, but company increases operating margin increase on improved income

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SAP increases profitability forecast despite tough Q2 SAP has strong growth in the MENA region, the company says. (Getty Images)
By  Mark Sutton Published  July 30, 2009

SAP saw a 40% drop in software revenue in the Q2 09 from the same quarter last year, although the company has increased its forecasted operating margin and says its is seeing continued growth in the MENA region.

SAP’s software revenue was down to 543m euros ($762m) and services revenue was also down by 5% to 1.9bn euros ($2.7bn), although net income was up 4% to 423 million euros ($594m).

The company blamed the difficult economic environment, and a strong performance in Q2 08 for the drop in software revenue, but said that cost cutting measures were working. Consequently, SAP raised its forecast for full year profitability operating margin to between 25.5% and 27% from 24.5% to 25.5%.

Werner Brandt, CFO of SAP commented: “Despite the challenging economic conditions, the strength of our business model combined with a strong cost discipline has proven itself once again by enabling us to report another quarter of strong operating margin growth. For the remainder of the year, we expect to maintain tight cost controls in all areas of the company.”

The MENA region bucked the trend according to a statement from Sergio Maccotta, managing director of SAP Middle East & North Africa, with continued software revenue growth of 50% year on year. The company is also expanding its regional customer base, and reports strong demand for its professional services.

Maccotta said: “Despite the current winds of uncertainty in the global economy, SAP Middle East and North Africa (MENA) remains one of the strongest sub-regions for the company. We are continuing to see growth in all sectors and especially in our software revenue alone, growing year-on-year by 50% in the region. We are confident of continued success moving forward through 2009.

“We are signing, on average, more than two new customers per week. We are also seeing continued demand for SAP Professional Services, as well as growth in the small midsize sector of the market,” he added.

Maccotta said that the company is also planning to expand in Saudi Arabia, alongside an expansion of its partner base and an increase in its University Alliance Programme to increase SAP skills in graduates.

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