SAP increases Q1 profit on strong US sales

German business software vendor SAP has reported an 11 pe rcent increase in first-quarter net income on strong sales, particularly in the U.S.

Net income rose to Euro 254 million (AUD$428 million as of March 31, the last day in the period being reported), or Euro 0.82 per share, from Euro 229 million, or Euro 0.74 per share, in the same period a year earlier.

Software revenue in the first quarter was up 17 percent to Euro 434 million from Euro 370 million a year earlier. At constant currency rates, revenue increased 20 per cent year-on-year. Constant currency rates exclude the impact of fluctuations in currency exchange rates.

"We are letting the numbers speak for themselves," said SAP Chief Executive Officer (CEO) Henning Kagermann, in a conference call. "Our order book is growing and our pipeline remains healthy."

Kagermann said SAP was "off to a great start" in 2005 but warned that the price environment "remains tough."

In the U.S., one of SAP's fastest growing regions as the company moves to win business from its closest competitor Oracle, sales increased 27 per cent to Euro 131 million from Euro 103 million. At constant currency rates, U.S. revenue was up 35 per cent year-on-year.

SAP's Safe Passage maintenance and migration program is aimed at all companies in the U.S. running PeopleSoft and J.D. Edwards (JDE) applications. PeopleSoft, which acquired J.D. Edwards & Co. in 2003, was purchased one year later by Oracle for $10.3 billion.

Kagermann declined to say how many customers SAP has been able to sign up through its Safe Passage program.

Revenue in the EMEA (Europe, Middle East and Africa) region grew 6 per cent to Euro 926 million from Euro 871 million a year earlier. However, revenue in Germany, SAP's home base, was down 2 per cent in the first quarter, as Europe's largest economy continues to battle high unemployment and sluggish consumption.

Leo Apotheker, SAP executive board and president of Global Field Operations, attributed the revenue growth in Europe to a larger volume of smaller deals and "steadily" growing sales to small and medium-size businesses. "We said last year that we expected sales in Europe to improve in 2005, and that's happening," Apotheker said in the conference call. "We're in good shape in Europe, but the economic situation in the region remains tough."

SAP's flagship ERP (enterprise resource planning) software continued to account for the lion's share of software revenue. The product generated revenue of Euro 174 million in the first quarter, up 12 percent from Euro 156 million a year ago.

The next largest revenue generator was the company's SCM (supply chain management) software, which came in at Euro 88 million, up 9 per cent from Euro 81 million a year earlier.

Sales to retail customers were strong in the first quarter "even without Retek," Kagermann said. Last month, Oracle outbid SAP to acquire Retek, a Minneapolis retail management software vendor.

SAP expects full-year 2005 revenue to increase between 10 per cent and 12 per cent, compared to 2004, the company said.

In the first quarter, SAP hired 1004 people, increasing its headcount to 33,209 as of March 31. The company plans to hire up to 3000 people, mostly software engineers, according to Kagermann.

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