SAP Posts Solid Fourth Quarter

Buoyed by one of its strongest quarters in more than a year,SAP posted an 18% sales increase in 1999--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.

SAP closed the year with a 30% increase in revenue, up to $1.66 billion from $1.28 billion in the same quarter last year. Profits for the quarter rose dramatically, up 109% from $153 million to $309 million. SAP's product revenues were up 43% to $1.14 billion from $798 million in fourth quarter 1998, with license revenue accounting for $816 million, an increase of 45% from the 1998 quarter. MySAP.com products, the centerpiece of SAP's Internet strategy, accounted for $130 million in license sales--most of that closing in December.

After the vendor's rough third quarter, analysts had been "cautiously optimistic" that they 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 to post $5.14 billion in sales for the year, up from $4.32 billion in 1998. Net income for the year was $606 million, a 14% increase from $531 million in 1998. The company's results reflected the overall slowdown for enterprise resource planning software, with just a 2% increase in license sales to $1.93 billion.

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 is viewing with skepticism.