Global enterprise software company SAP says it has fallen short of its profit goal for the first half of 2012 and, as a result, is going to rein in costs to meet its full-year profit goal.
SAP announced that it is falling short of its
goal to make a $6.56 billion internal profit in 2012, based on
weaker-than-expected first-half profitability, and it is seeking to reduce
costs to reach its goal.
Germany-based SAP said its first-half
internal profit, also known as operating profit, came in at $2.35 billion and,
at that rate, full-year operating profit will come in at only $6.23 billion to $6.48
billion, which was only 95 percent of the companys goal. The announcement was
made by SAPs Chief Financial Officer Werner Brandt in a video address to
employees and was reported Aug. 4 by the German news magazine WirtschaftsWoche
"We have to cut costs considerably in
the second half to reach our internal target," Brandt stated, according to
the magazine report.
Increased spending has cut into
profitability, he explained, citing acquisitions the company has made, new
hiring and an increase in travel. While SAP does not need to impose a hiring
freeze, Brandt said the company would ask employees to curtail travel and
instead use video conferencing technology to meet with people in distant
SAPs growth strategy of late has been to
invest in cloud computing, mobile software and in-memory technology. It
credited the success of its HANA
for a second-quarter 7 percent profit increase to $1.12
billion on an 18 percent jump in revenue to $4.8 billion compared with the
SAP noted in a statement July 12 that its
HANA database business had an outstanding quarter, with significant deals in
all regions. The HANA platform
software running on partner hardware is designed to do data analytics faster
because data is stored in server memory rather than retrieved from disk
storage, which takes longer.
SAP also noted sales growth due to synergies with
which it acquired in late 2011 for $3.84 billion. However, expenses associated
with the acquisition of SuccessFactorswhich produces cloud-based enterprise
business applications (including HR, finance, payroll and supply-chain
management)reduced SAPs operating margin in the quarter by 2.4 percentage
points to 23.6 percent from the year-ago quarter.
SAP upgraded its business intelligence
software suite in July by improving support for mobile platforms, and adding
enterprise social media features and functionality that better address the need
in enterprises for big data analytics.