SAP net profit up 49 percent on lower revenue

SAP AG used its fourth-quarter financial news conference to make some bold claims, and those relating to CRM (customer relationship management) software are almost certain to raise some eyebrows at Siebel Systems Inc., SAP's main rival on the CRM front.

"We're the number-one supplier of CRM products in Europe and, based on fourth-quarter figures, we're now also the number-one supplier in the U.S.," said Leó Apotheker, president of global field operations at SAP, in an interview. "We're number two in CRM worldwide."

SAP's fourth-quarter CRM sales in the U.S. accounted for about one-third of the group's total revenue in the country, according to Apotheker. CRM accounted for about 20 percent of European sales, he said.

"And the tendency is increasing upward," Apotheker said. "CRM and portals are our fastest growing areas of business in the U.S."

SAP is zooming in on the public sector, particularly in the U.S., as governments seek to improve the efficiency of their operations, according to Apotheker.

"We've had some big successes in the U.S., like our deals with the IRS and NASA," he said, referring to the Internal Revenue Service and the National Aeronautics and Space Administration. But while the U.S. federal government has been investing substantially in software due in part to national security measures, states and local governments have not invested as much, he said.

The picture in Europe, according to Apotheker, is slightly different. "There is no federal government spending as such but we're seeing activity at the national and local levels," he said.

Asked whether the prospect of war with Iraq could have a negative impact on SAP's business prospects for 2003, Apotheker said that depends on what kind of war is fought, if one is fought at all. "If it's a short war, that could affect results in one of our quarters," he said. "If it's a prolonged war, who knows what will happen. We're prepared for all circumstances."

Many of the problems the IT industry has faced over the past couple of years are "homemade," Apotheker said. "They came from over-hyping, over-promising and under-delivering products." Too many vendors, he said, destroyed customer trust because they couldn't deliver on the promises they made.

As for growth markets, Apotheker sees China as a market whose "economy is already slightly bigger than France's and could soon exceed Japan's." What makes China so interesting, he said, is that country is in huge need of IT systems to operate more efficiently and doesn't have many legacy systems to deal with. "We had 100 percent growth in China in 2002," Apotheker said, without providing sales figures.

Russia, too, offers great market potential. "We have a deal with the Russian railway, which employs over 1 million people and accounts for one-third of the world's rails," Apotheker said. "Just imagine how an HR (human resource) system can improve efficiency here."

In Japan, SAP, like many other non-Japanese vendors, had struggled with local suppliers, according to Apotheker. "Japanese users of IT have shown a bias for homegrown systems, but this is changing," he said. "We're beginning to see demand for packaged solutions" involving other vendors.

Acquisitions aren't necessary to drive sales in these regions, "but you should never say never," he said.

SAP has reorganized its sales activities in the U.S., and Apotheker is optimistic about the future. "The team is really fired up, more than it's ever been," he said.

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