SAP Revenues Decline for Q4 and 2009

SAP yesterday shared preliminary financials for its fourth quarter and full year of 2009, and the results were marginal. Revenue declined in the single-digit percentage range in most regions for both the quarter and full year. Margins offered a ray of hope, eking out a 0.1% gain that beat company estimates and Wall Street expectations. But the results stood in contrast to gains recently reported by SAP rival Oracle.

SAP's software and software-related service revenues for the quarter ended December 31 were approximately $3.6 billion (2.5 billion Euros), a decline of about 4% from same-quarter 2008 revenues of $3.8 billion (2.6 billion Euros - all figures are U.S. GAAP). Quarterly margins declined approximately 4% to 32.8% from 36.6% in 2008.

For the full fiscal year, SAP's total revenues declined approximately 8% to $15.3 billion (10.6 billion Euros) from $16.6 billion (11.5 billion Euros) in 2008, slightly ahead of company and Wall Street expectations. Software and service revenues declined 5% in Europe, the Middle East and Africa, held steady in the Americas and declined 1% in the Asia/Pacific region. Full-year margins improved slightly to 24.7%, up from 24.6 percent a year earlier.

The company's profit performance was a credit to cost-cutting efforts, which included layoffs of 3,700 employees in early 2009. SAP's 2009 operating margin was 27.5%, beating company expectations of between 25.5% and 27% at constant currency.

SAP had no comment on the results because it has entered the quiet period leading up to posting of final results on January 27. The better-than-expected results boosted the company's stock price 1.9% yesterday to $50.79 (35.35 Euros) on the Frankfurt market.

In contrast to SAP's flat or declining results, rival Oracle has fared better. In its most recent quarter ended November 30, Oracle posted a (GAAP) 4% increase in total revenues to $5.9 billion, a 2% increase in software revenues to $1.7 billion, and a 10% increase in operating income to $2.2 billion.

"For the fourth consecutive quarter, Oracle took market share from SAP in every region around the world," stated Oracle President Charles Phillips in a press release on the results.

Maintenance and service fees are a significant contributor for Oracle, with those revenues increasing 14% to $3.2 billion in the same quarter on the strength of 22% annual maintenance and service fees. SAP announced yesterday that it was delaying by one year its five-plan to gradually increase Enterprise Support fees to 22%. Bowing to customer demands, the company also introduced a lower-cost Standard Support option priced at 18%.

SAP also announced yesterday that it has reassigned executive board members John Schwarz and Jim Hagemann Snabe, who have had special responsibilities for SAP BusinessObjects and development of large enterprise solutions, respectively. Schwarz will head a new Industry and Solution Management Board aimed at quickly translating market requirements into new offerings. Hagemann Snabe will lead a new Product Design and Development Board aimed at promoting innovation and breakthrough technologies.

"Our goal is to enable SAP to bring the right innovations and solutions to all of our customers in a much shorter timeframe," said Leo Apotheker, chief executive officer, SAP.