Blaming the slumping economy and, to a larger extent, the ongoing accounting crisis in the U.S., German enterprise software maker SAP AG this morning announced disappointing results for the second quarter.
Earning were in line with the preliminary results that SAP issued last week, when company officials warned they would not meet earlier projections of 15 to 20 percent revenue increase for the full year, but will come in closer to a 5 to 10 percent increase for the year.
In fact, for the second quarter, ended June 30, total revenues declined four percent over the same period last year to about $1.78 billion, versus $1.85 billion in 2001.
EBITDA results, which amount to earnings before certain charges are taken into account, showed a profit of about $380 million, versus $450 million for the same period last year. Net income, excluding acquisition charges and costs associated with an investment in beleaguered e-business software maker Commerce One Inc., fell 25 percent to around $175 million, compared with $235 million for the same year-ago period.
Second quarter license revenues decreased from almost $650 million for the second quarter in 2001, to around $547 million for the current quarter, according to officials of the Walldorf, Germany, company.
Software revenues related to SAPs newer lines of business, including mySAP CRM (customer relationship management) and SCM(supply chain management) were particularly hard hit. CRM revenues were down roughly 3 percent from 2001, to a little more than $100 million. SCM sales were down a startling 31 percent, to about $105 million.
“This was not a splendid quarter, but put it in perspective a little bit,” said Hasso Plattner, co-CEO of SAP, during a press conference this morning at SAPs New York City offices. “The sudden rise of uncertainty in [corporate financial] reporting really hurt our business. Major corporations were affected – some were prospects, some were customers. We had significant millions of dollars that we could not close because of that.”
Plattner said that in contrast to the current accounting woes in American businesses, SAP stands for conservative accounting.
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“But with the dismal state, we wrote down some of software companies [in SAPs portfolio] as well,” said Plattner. “A big chunk of the cake was obviously Commerce One.”
Commerce One remains a strategic partner to SAP, according to Plattner.
In regard to its own financial standing, SAP said it will not implement a massive headcount reduction, as had been rumored, but rather take a more sophisticated approach to cost cutting. That includes salary and benefit reductions, a hiring freeze, no replacements for staff lost through attrition, project scale backs and a revision in travel procedures, according to Plattner, who stressed that the company will not cut back on research and development.
“We have to offer software solutions that make these companies really tick,” said Plattner. “And that means we need people. We [will enforce] a reduction of projects and a revision of travel; we let our people that work hard travel in a nice style. We will travel coach now. We will ask our employees to renegotiate with us, sit down, so that we can avoid [layoffs].”
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