SAP's Profit Jumps Despite Falling Sales

SAP, the market leader in ERP sales, is making more by selling less and doing a better job than its rivals at weathering the downturn in the software industry.

For its first quarter ended March 31--the last before co-founder Hasso Plattner steps down as CEO--SAP reported an operating profit of $330.8 million on revenue of $1.65 billion. That's up from an operating profit of $258.9 million on revenue of $1.81 billion in the year-ago quarter. Net profit for the quarter was $202.3 million, more than double last year's $70.7 million.

SAP's software-license sales fell to $382.9 million, from $437.3 million a year ago, though it blames most of the decline on changing currency rates. Still, the company says, growth in software revenue boosted worldwide market share from the previous quarter; market share topped 54% at the end of the first quarter, up from 51% at the end of the fourth quarter 2002.

SAP's focus on its U.S. division appears to be paying off. Software-license sales in North America climbed 1%, to $77.2 million. Six months ago, SAP brought in former Siebel Systems Inc. exec Bill McDermott to head up SAP America. McDermott revamped the U.S. sales team and is focused on making the division a harder-driving, more customer-focused organization.

SAP, which sells business-planning software to more than 19,000 customers worldwide, has been focusing on cost controls. It reiterated its forecast from January that it expected to lift 2003 operating margins by around 1 percentage point, from 22.7% in 2002, on moderate revenue growth. The margin for the first quarter, usually the weakest quarter of the year, was 20%.

Competitors PeopleSoft Inc. and Siebel said earlier this month that their first-quarter results would be below Wall Street estimates.