Europe’s SAP warns of Arab Spring toll on profits

Software giant says political turmoil in Middle East could affect business over coming quarters

Tags: EgyptEnterprise softwareLibyaSAP
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Europe’s SAP warns of Arab Spring toll on profits Europe’s largest software maker said Arab unrest could pose a risk to earnings (Getty Images)
By  Daniel Shane Published  May 1, 2011

Europe's largest software maker, SAP AG, has warned that civil unrest in the Middle East could "negatively impact" on the company's financial position.

The German vendor said revenues for the first quarter rose 21 percent to €3.02bn ($4.47bn), while net income increased 20 percent to €528bn.

However, the company stated that while the impact of uprisings in the Middle East on business had so far been contained, this could change in the coming months.

"It is very difficult to judge how the situation in the region will develop," SAP's interim report read. "As a result we cannot make any reliable judgments at this stage about the possible effects of these events on our business. We cannot exclude the possibility that they may negatively impact our financial position, cash flows, operating profit, and stock price."

SAP has numerous high-value agreements to provide regional organisations with its software. Notable examples in territories impacted by the unrest include a bumper deal signed with the Libyan government in 2008 to provide software to nine universities and two educational institutions, and a five-year multimillion dollar agreement signed with Egypt's government-administered postal service in 2007.

Two months ago, SAP agreed a deal to standardise all of the UAE's Federal Electricity and Water Authority's (FEWA) existing SAP software.

The company reported a 14 percent rise in quarterly earnings for the EMEA market to €1.48bn.

Post-recession, SAP has enjoyed a rally of strong revenue growth across the region, but said the so-called ‘Arab Spring' protests "could pose a risk to this recovery".

SAP has suffered a couple of tumultuous years. During the global economic crisis, the company's revenues were battered as enterprises reigned in their IT budgets. This led to the resignation of then CEO Leo Apotheker and the installation of a co-CEO structure, headed up by Jim Hagemann Snabe and Bill McDermott.

Since that decision, the company's quarterly performances have improved markedly, while continuing to be outstripped by those of its main competitor, Silicon Valley-based Oracle Corp. Late last year, SAP lost a legal battle with Oracle, which had accused the company of stealing its intellectual property. A court ordered SAP to pay $1.3bn in damages, although the company is the process of appeal.

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