SAP revenue sags, cuts outlook

Posted Oct 28th 2009 11:50AM by Tom Taulli
Filed under: Earnings Reports, Technology

While the world economy continues to improve -- or at least "stabilize" -- this is not enough to get companies confident in buying expensive software. Just look at the latest quarterly results from business software giant, SAP (NYSE: SAP).

Revenues came in at 2.51 euros, which is a 9.2% drop over the past year. True, net income increased 12% to 435 euros (yes, SAP has been slashing costs). But, this was off from consensus forecasts.

A big problem: new software licenses continued to deteriorate. SAP posted 525 euros for the quarter, which is down from 763 euros from a year ago. Software licenses are critical for building ongoing maintenance revenues.

Interestingly enough, SAP is seeing more weakness in emerging markets as well as Japan, which is certainly troubling. Isn't this where the growth is supposed to be? In fact, SAP has cut its 2009 revenue outlook from a drop of 4-6% to a drop of 6-8%.

Yet, SAP is not alone. It's arch rival, Oracle (NASDAQ: ORCL), posted a 6.6% drop in revenues during its latest quarter.

All in all, it's going to take time for things to rebound. Although, when they do, the growth can be strong. However, in the meantime, Wall Street does not want to wait, selling off the shares of SAP -- which were down 8% in Wednesday morning trading.

Tom Taulli is the author of various books, including The Complete M&A Handbook.

Tags: inthenews, Oracle, ORCL, SAP