SAP Weathers The Downturn

Business software maker SAP is riding out the recession better than some of its peers. The German company Wednesday reported that software sales fell 7% in the fourth quarter, but the drop was more than offset by an 8% jump in services revenue.

"A lot of companies are using the downturn to get their house in order," said Bill McDermott, SAP's president of Global Field Operations, in an interview.

McDermott said a number of customers are using SAP's enterprise resource planning tools and services to consolidate operations and cut costs. "The services pipeline doesn't look too bad," he said.

SAP's overall fourth-quarter revenue rose 8% year over year, to $3.5 billion, while net income jumped 13% to $850 million. By contrast, Microsoft last month said quarterly profits plunged 11%.

SAP's 2008 numbers enjoyed a boost from the $6.8 billion acquisition of business intelligence software maker Business Objects in 2007. "It's fully integrated now," said McDermott.

Despite the gains, SAP plans to trim staff in order to deal with an economic environment that McDermott called "uncertain." The company began 2008 with 51,800 employees and will exit 2009 with about 48,500 workers. McDermott said SAP will rely heavily on attrition to achieve the reduction.

For the full year 2008, SAP reported a 6% increase in software revenue, a 14% rise in services revenue, and a 13% jump in overall sales. Net income for the year declined 2%, to $1.9 billion. Earnings per share rose 1% to $1.62. SAP did not provide financial guidance for 2009. "There's not a lot of visibility out there right now," said McDermott.