A week after warning that its third-quarter financial results would be below expectations, SAP AG today delivered the full extent of the bad news: a 64 per cent drop in profits during the three-month period ended September 30.
The decline was even steeper than financial analysts had predicted after last week's warning, and SAP said it now expects profits for the year as a whole to be below 1998 levels.
SAP, the top vendor of ERP software, reported that it earned $US48.6 million in the third quarter. That was down from last year's profit of $134.7 million, as software sales dipped 2 percent. Total revenue increased 7 per cent to $1.21 billion, up from $1.13 billion a year ago.
The German company blamed the weak showing on lower than expected software sales in the US and Japan, plus a revenue shortfall in the UK. "Even though we are in a difficult market environment, we are still disappointed by these results,'' said Hasso Plattner, SAP's co-chairman and CEO.
Most ERP vendors have had a difficult 1999 as the window for buying their software to fix year 2000 problems closed and many users put new investments on hold until after the date changes. For example, Baan is expected to report its fifth straight quarterly loss. And yesterday, PeopleSoft said its revenue and net income were down for the third quarter ended September 30.
PeopleSoft's net income plummeted 88 per cent to $5.2 million from $44.2 million year on year. Net income per share fell from 17 cents one year ago to 2 cents this quarter.
The company's revenue fell 13 per cent for the third quarter to $303.1 million, down from $351.3 million in the third quarter of 1998, PeopleSoft said in a statement. The company didn't elaborate on the poor results, merely saying it had been a year of transition for both the company and the ERP industry.
While the company's revenue from services grew slightly, its revenue from license fees plummeted to $48.8 million from $147.3 million the year earlier.