Margin management keeps SAP ahead

17 Jul 2003

Despite an 8pc fall in total revenue, German software giant SAP has managed to increase its earnings for the second quarter ending 30 June 2003 by improving operating margins.

The world market leader in enterprise resource planning (ERP) software, which employs nearly 400 people in Ireland, saw operational income rise by 6pc to €340m, compared with €320m in the same period last year. The operating margin for the second quarter of 2003 was up three percentage points to 21pc compared to the second quarter of last year.

While profits and margins increased, revenues were down in almost every division. Total revenues for the second quarter of 2003 were down 8pc to €1.6bn (2002: €1.8bn). Software licensing revenue plummeted 13pc, from €496m in 2002 to €431m this year. Revenues from mySAP CRM (customer relationship management) and mySAP SCM (supply chain management) fell by 16pc and 17pc respectively.

Product revenues, which include software and maintenance fees, for the second quarter were flat at €1.1bn. Consulting and training revenues were down to €479m (2002: €545m) and €75m (2002: €115m), respectively. One of the few bright spots was that maintenance revenues rose to €633m from €595m the previous year.

Despite falling revenue, the company claimed to have gained market share over rivals during the quarter. SAP says it now has 55pc at the end of the second quarter of 2003 compared to 54pc at the end of the first quarter of 2003 and 45pc at the end of the second quarter of 2002.

SAP’s worldwide headcount rose by 307 during the quarter, pushing the total up to 28,961 full-time equivalent employees at 30 June 2003.

Henning Kagermann, chief executive officer, SAP AG, said: “The business environment remains tough, but we executed better than most of our competitors and, more importantly, we once again achieved our goals of improved operating margins and continued market share gains.”

Looking ahead, the company said it expected moderate margin and operating profit improvement but, in line with its usual policy, declined to speculate on expected revenue performance.

By Brian Skelly