SAP AG issued a warning Thursday that it is reducing its revenue and earnings expectations for its just-ended second quarter.
An inability to close key deals in Europe and Japan, along with year-over-year revenue declines in the Americas and the Asia/Pacific region, contributed to its revenue crunch, SAP said. The company now expects second-quarter revenue of about 1,778 million (US$1.76 million), a 4 percent drop from the year-ago quarter, and operating income of approximately 326 million, down 23 percent. SAP will release its full second-quarter results next Thursday.
SAP also revised its full-year 2002 expectations, saying it now anticipates revenue growth of 5 percent to 10 percent, down from its earlier 15 percent growth projection. If market conditions remain as grim as they were in June, growth will be around 5 percent; with a "modest" market improvement, SAP's growth will be closer to 10 percent, Co-Chairman and Co-Chief Executive Officer Hasso Plattner said in a conference call with press and analysts following the company's announcement.
SAP does not plan any layoffs because of its reduced financial forecast. However, it will institute a hiring freeze and not fill positions vacated through attrition, Plattner said. It will also terminate some third-party services and reorganize internal projects in order to save money, he said.
Plattner apologized during the call for SAP's "somewhat disappointing results."
"As you are aware our entire industry is facing challenging times, and SAP is no different," he said.
While revenue in SAP's largest market, EMEA (Europe, the Middle East and Africa), grew 1 percent during the quarter, revenue in the Americas declined 12 percent and revenue in the Asia/Pacific area dropped 5 percent, SAP said.
SAP also warned that it intends to write off 318 million related to its investment in Commerce One Inc., an ailing software and services company of which SAP owns 20 percent. One-time charges, including the Commerce One charge, will cause a reported net loss of about 235 million for the quarter, SAP said.
SAP has previously recorded some of Commerce One's net losses on its own income statements. Taking an impairment charge this quarter will reduce the risk of further losses from Commerce One on SAP's own balance sheet, the company said. SAP's relationship with Commerce One is a significant strategic advantage, and will not be affected by the write-off, Plattner said.
Trading of SAP (SAP) shares was briefly halted on the New York Stock Exchange (NYSE) and German stock exchange before the company released the lower forecast. In afternoon trading on NYSE, SAP's share price was $18.48, down 13.44 percent from Wednesday's close.