SAP reports dip in Q2 revenue

German business software vendor SAP AG reported a dip in second-quarter revenue Thursday, as enterprises continue to hold back on IT investments.

Software license revenue, viewed as a measure of new business, dropped 13 percent in the second quarter to €431 million (US$ 493 million as of June 30, the last day of the period being reported) from €496 million in the same period the year before, SAP said in a statement. On a constant currency basis, software revenue was down 5 percent year on year, it said.

Total revenue for the second quarter fell 8 percent to €1.6 billion from €1.8 billion the year before. At constant currency levels, however, total revenue increased 2 percent year on year.

Product revenue, including software and maintenance revenue, remained unchanged at €1.1 billion in the second quarter compared to the same period the year before. Maintenance revenue rose to €633 million from €595 million year on year, while consulting sales dipped to €479 million from €545 million and training sales to €75 million from €115 million.

Based on software revenue, SAP said it believed it had gained additional market share in the second quarter. On a rolling four-quarter basis, the company's worldwide share of the market for enterprise application software was 55 percent at the end of the second quarter, compared to 54 percent at the end of the first quarter of 2003 and 45 percent at the end of the first quarter of 2002.

For the six months ending June 30, SAP reported an 8 percent drop in sales to €3.2 billion from €3.4 billion. On a constant currency basis, total revenue for the first six months of the 2003 fiscal year increased 1 percent compared to the same six-month period last year, SAP said.

Net income for the second quarter was €219 million, or €0.71 per share, compared to a loss of €232 million a year earlier, resulting largely from impairment charges related to the Commerce One Inc. write-down of €297 million. Excluding stock-based compensation, acquisition and impairment-related charges, net income for the second quarter was €251 million, or €0.81 per share, compared to €155 million for the same period the year before, representing a 62 percent increase.

Second-quarter operating income increased 6 percent to €340 million from €320 million the year before. Operating margin, or operating profit as a percentage of sales, was up 3 percentage points in the second quarter to 21 percent year on year. The operating margin excluding stock-based compensation and acquisition and impairment-related charges increased 6 percentage points to 24 percent in the second quarter compared to a year earlier.

For the first six months, operating income increased 26 percent to €638 million from €506 million year on year. Excluding stock-based compensation and acquisition and impairment-related charges for the six month period, operating income rose 23 percent to €692 million from €562 million for the same six-month period the year before, SAP said.

At the end of June, SAP has 28,961 full-time employees, an increase of 307 full-time employees since March 31, 2003.

Although the business environment remains tough, the company performed better than most of its competitors and, more importantly, was able to achieve its goals of improving operating margins and gaining market share, Chief Executive Officer Henning Kagermann said in the statement.

SAP raised its forecast for operating margin growth, excluding the effect of stock-based compensation and acquisition-related charges, projecting an increase of as much as 1.5 percentage points in 2003, compared to the year before. Previously, the company expected a 1 percentage point increase.

The Walldorf, Germany, software company also said it expects earnings per share, excluding stock-based compensation and acquisition and impairment-related charges to be in the range of €3.45 per share to €3.60 per share.

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