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SAP profits down 16% in Q1 09

SAP sees 33% drop in software revenue, but MENA continues to post strong double-digit growth

SAP has posted worse than expected results for Q1 2009, with software revenue down 33% and net income down 16%.

The software company said that poor market conditions and charges relating to acquisitions and cuts had pushed overall net income down to euros 204m ($270m) compared to euros 242m ($321m) for first quarter 2008. Analysts had predicted net income of euros 261m.

Key software revenue was down to euros 418m from euros 622m, while quarter on quarter, software revenues were down 216% from Q4 last year, with overall revenue was down 45%.

The situation was not mirrored in the Middle East and North Africa region however, where Sergio Maccotta, managing director for SAP MENA, told itp.net that overall revenues were up 62.7% from the same quarter last year, and software and software services revenues (SSRS) were up 44.7%.

“In MENA, Q1 saw an increase in total revenues for the company of over 62.7% against Q1 last year. I feel that this is quite a strong result in terms of growth and the establishment of our operations,” said Maccotta.

“The growth of the market here is still healthy, with strong expenditure in order to strengthen the business support, secondly the difference between the growth in SSRS and total revenues, is indicating the effort that SAP Middle East is putting into increasing its service delivery capabilities here, we are providing additional support to partners, and to the market in terms of consulting and support,” he added.

Maccotta pointed out that in Q1 of this year, SAP MENA signed 28 new customers, more than double the rate of new customer growth from last year. The company is also expanding its channel, with seven new partners to be added in the region soon.

SAP locally is also still expected to extend its headcount, in contrast to around 3,000 layoffs that are planned worldwide.

On a global basis, SAP CEO Léo Apotheker said that the company expected the second quarter of the year to remain tough, and the company has declined to post predictions for SSRS revenue for the year.

“While visibility for software revenues remains limited, we continue to take the necessary steps to protect our margin in this tough operating environment. The cost containment measures that we initiated in October of last year and carried into the first quarter of 2009 have really taken hold, and we are pleased with the resulting margin performance,” said Apotheker.