SAP reports dip in Q2 revenue and earnings

SAP AG reported a drop in revenue and earnings for its second quarter on Thursday, after issuing a warning last week. SAP's revenue declined 3.8 percent to €1.78 billion (AUD$3.25 billion) in the second quarter of 2002 from €1.85 billion in the same period a year ago, the company said in a statement.

Second quarter EBITDA (earnings before interest, taxes, depreciation and amortization) fell 16 percent to €377 million from €450 million in the year-ago quarter.

The company, Europe's largest software maker, reported a narrower net loss than it stated in last week's profit warning. SAP posted a net loss of €232 million in the second quarter, slightly lower than the €235 million it reported last week.

The second-quarter loss includes €409 million in write-downs on minority investments, including its 20 percent holding in Commerce One Inc. Last week, the company said write-downs would total €414 million.

The loss was the first since SAP listed on the Frankfurt stock exchange in 1988.

Before charges for stock-based compensation programs and acquisition-related costs, second quarter operating income fell 14 percent to €324 million from €424 million year-on-year, and was slightly lower than the €326 million reported last week. Second-quarter net income, excluding acquisition charges and other impairment costs of minority investments including Commerce One, declined 25 percent to €175 million from €233 million the year before.

Global sales provided a mixed bag of results. While second quarter revenue in the EMEA (Europe, the Middle East and Africa) region increased 1 percent to €976 million from €962 million a year ago, it decreased 5 percent to €209 million from €220 million in the Asia-Pacific region and dropped 12 percent to €593 million from €671 million in the Americas. At "constant" currency rates, however, revenue in the Americas would have declined only 4 percent, SAP said.

License revenue in the second quarter of 2002 fell 23 percent to €496 million from €646 million the year before.

In a press release issued on July 11, SAP restated its full-year guidance for 2002 based on the preliminary second quarter 2002 results. The company now expects revenue in 2002 to grow between 5 percent and 10 percent year-on-year, compared to its previous forecast of 15 percent.

SAP still aims to achieve a 21 percent operating profit margin target this year, or 1 percent higher than in 2001, despite lower expected revenue, the company said.

In a conference call with the press, Hasso Plattner, chief executive officer (CEO) and co-chairman of SAP, said the company has put a freeze on hiring and is not replacing employees leaving the company, in addition to reducing other costs. He declined to provide numbers.

The company, Plattner said, "is still engaging in large deals." Although these deals are fewer, "they're still there," he said.

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