SAP Posts Solid Fourth Quarter

Buoyed by one of its strongest quarters in more than a year, SAP today posted healthy fourth-quarter gains in sales and earnings. The company also reported an 18% increase in sales for the year--a far cry from its glory days, but solid enough to indicate that the applications vendor is emerging from the darkness of the enterprise resource planning market slowdown.

For the fourth quarter, the company reported revenue of $1.7 billion (1.65 billion euros), a 30% increase over the year-ago period. Profits for the quarter jumped 109% to $322 million (317 million euros) over last year.

SAP's product revenue was up 43% in the fourth quarter of 1998. MySAP.com products, the centerpiece of SAP's Internet strategy, accounted for $131 million (129 million euros) in license sales--most of that closing in December.

After the vendor's rough third quarter, analysts had been "cautiously optimistic" that the company would rebound. "But we didn't expect them to rebound the way they did," says Mike Bittner, research director at AMR Research. Both quarter and year-end numbers were higher than expected.

Despite the company's difficulties in 1999, SAP managed sales for the year of $5.2 billion (5.11 billion euros), an 18% jump over the previous year. Net income was up 14% over the previous year to $611 million (602 million euros).

The company indicated that its fourth quarter wasn't an aberration but an indicator of things to come, saying it expects to double its 1998 revenue by 2001--a claim AMR views with skepticism. In the year ahead, SAP says product revenue will grow faster than service revenue, which will lead to an improved operating margin. However, for the first quarter, the company will invest significantly in marketing and personnel for mySAP.com, which will make cost growth a few percentage points higher than revenue growth.