SAP shrugs off software gloom as Q1 beats forecasts
Thursday April 19, 9:00 am Eastern Time
By James Mackenzie
biz.yahoo.com
FRANKFURT, April 19 (Reuters) - Europe's biggest software group SAP posted better-than-expected first quarter results on Thursday, shrugging off the gloom weighing on its U.S. rivals with an upbeat outlook for the next two quarters.
``Despite the difficult market environment, SAP is optimistic about the first three quarters of 2001,'' it said in a statement.
A doubling in net profit combined with a 29 percent rise in sales and the upbeat outlook statement sent the share as much as seven percent higher at the opening and by 1205 GMT, SAP shares were almost eight percent up at 166 euros in a flat market.
Investment bank Morgan Stanley upgraded its rating on SAP to ``outperform'' from ``neutral'' following the results and other analysts were also impressed.
``It was a very strong set of results, pretty much across the board,'' said Merrill Lynch analyst Daud Khan, who rates the stock a medium-term accumulate and long-term buy.
Kicking off the reporting season for European software companies, SAP said sales growth in the first nine months would exceed the 23 percent seen in full year 2000.
Operating margins would grow by one or two percentage points above the 14 percent seen in the first nine months of 2000.
The forecast contrasts strongly with downbeat statements about prospects for the second quarter from Siebel Systems (NasdaqNM:SEBL) and i2 Technologies (NasdaqNM:ITWO) on Wednesday, two of its U.S. rivals which have been hit by slowing spending by corporate IT departments.
``They were great figures,'' one fund manager in Frankfurt said. ``It was especially good that the U.S. appears to be doing significantly better than a lot of people were expecting.''
EARNINGS BEAT EXPECTATIONS
SAP posted an 82 percent rise in operating profit before charges for its staff benefits programmes to 233 million euros ($204.6 million).
The rise, following a strong fourth quarter, came on top of a weak first three months last year but the result was still well ahead of analysts' expectations of about 152 million euros.
Net profit more than doubled to 117 million euros, while earnings per share rose to 0.36 euros from 0.18 euros, compared with analysts' forecasts of 0.25 euros. Sales were up 29 percent at 1.52 billion euros, also ahead of expectations.
SAP's nine-month forecast did not dispel entirely the uncertainty over the outlook to the end of 2001 and a repeat of the 31 percent sales rise seen in the fourth quarter of 2000 appears unlikely, analysts said.
But even a more modest growth rate in the last three months of the year would leave the company well placed.
``The key will always be the fourth quarter. If they can get 20 percent sales growth in Q4 they will be doing pretty well,'' Merrill Lynch's Khan said.
SLOWDOWN FEARS
Analysts had been awaiting SAP's outlook with more than usual interest given the uncertainty surrounding software spending and gathering signs that the slowdown which has hit U.S. companies could be crossing the Atlantic.
Even by the standards of SAP's historically volatile share, 2001 has been a rollercoaster year with the stock shooting up to 210 euros in January before tumbling to a two-year low of 102 euros in early April and climbing 60 percent since then.
It has been trading at a premium to arch-rival Oracle (NasdaqNM:ORCL), with a price to earnings ratio of 51.3 against 36.9 at Wednesday's closing prices, according to Reuters 3000 data.
Most of SAP's main U.S. rivals in the web-based business-to-business segment, including Oracle, Ariba Inc (NasdaqNM:ARBA) and i2 Technologies have warned results were being hit by faltering economic growth in the United States.
Siebel Systems, the champion in customer relationship management software, said it faced an ``unbelievably soft market'' in the second quarter.
SAP, which overcame major problems with slowing sales and high staff turnover at its U.S. business last year, benefited from its broad geographic and product mix, analysts said.
Its business grew slightly more slowly in the United States than in Europe and was boosted by exchange rate effects.
Sales in the American region rose 26 percent to 550 million euros, compared with a 31 percent rise to 796 million euros in Europe, the Middle East and Africa. Excluding exchange rate effects, American sales were up 20 percent.
New licence sales rose by 24 percent to 458 million euros, again beating analysts' forecasts, which predicted licence sales of about 439.5 million euros.
SAP also stood apart from U.S. rivals like Siebel and Ariba, which have announced major job losses, saying it had taken on 1,000 new staff since the beginning of the year. |
