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By Mel Duvall
Enterprise software giant SAP managed to eke out a 4% gain in profits in the second quarter, but that gain was largely the result of cost-cutting measures.
In results released early Wednesday, the German software company reported that sales declined 9.8% in the quarter to €2.58 billion from €2.86 billion. More troubling was the fact that topline software revenues fell 40% in the quarter from €898 million in 2008 to €543 million. Software services, support and maintenance revenues were also down, but not as severely, slipping 5% to €1,953 million from €2,061 million.
In an earnings call following the release of the results, SAP Chief Executive Leo Apotheker acknowledged it was a tough quarter, but said the company is now starting to see improved visibility into the second half of the year. "I am cautiously optimistic that the worst might be behind us," he said. "Things are still tough, but I think it's safe to say we are seeing more stability."
Analysts said SAP appears to have done a good job of controlling costs as the economy faltered. In January, the company announced its first job cuts ever, as it forecasted sales of its business software would be severely impacted by the global recession. In the second quarter update, the Walldorf, Germany-based company said it was close to achieving its target of eliminating 3,000 job and was making progress in its bid to cut costs by €650 million to €700 million. The cuts have helped the company increase its operating margin by 4.4 percentage points to 25.1%. SAP now expects its full-year operating margin will range between 25.5% and 27%, an improvement from the previously forecasted range of 24.5% to 25.5%.
Apotheker also took a moment during the conference call to comment on IBM's $1.2 billion takeover of predictive analytics company SPSS. SPSS has been a long-term partner of SAP. "I don't expect the acquisition of SPSS by IBM to impact our relationship," he said. "It might simplify our overall offering."
SAP's chief rival Oracle reported in June that revenues for its fiscal fourth quarter, which ended May 31, fell for the first time since 2002. Oracle's revenue fell 5.2% in the quarter to $6.86 billion, while its profit dropped 7.2% to $1.89 billion. Late last week, Microsoft, which competes with SAP for mid-range enterprise customers, posted a 17% decline in revenues for its fiscal fourth quarter, ended June 30, and a 29% drop in quarterly profits.
It marked the first time Microsoft's sales had declined on an annual basis since the company went public more than two decades ago.
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