SAP profit surges 60% as profile rises in U.S

SAP AG, the German-based business software giant, said Thursday that first-quarter net earnings rose 60 percent from a year earlier, to E298 million ($325 million), but revenue dropped 8 percent to E1.52 billion.

The company makes software that businesses use for accounting, supply-chain management and customer relationship management. Headquartered in Walldorf, Germany, SAP is the largest business application vendor in the United States and has nearly 20,000 corporate customers worldwide.

SAP said it expanded its U.S. market share in the first quarter, without specifying figures, and cut its operating costs substantially without cutting jobs.

But analysts pointed out that certain sources of revenue, such as those for software maintenance and for consulting services, were down, as were earnings overall in Europe.

SAP said that while the number of European sales contracts increased, companies bought less. Because of a weak European economy, it said, revenue in Europe, the Middle East and Africa dipped 4 percent to E854 million.

First-quarter Asia-Pacific revenue increased 7 percent to E198 million.

In the Americas, where SAP has recently reorganized its U.S. sales force and implemented cost-cutting measures, revenue was down 20 percent at E468 million. When measured in constant currency rates, however, there was a 1 percent increase.

Maintenance revenues – fees the company charges to maintain software it has already sold – increased by 1.8 percent to E608 million but fell short of the company’s own forecasts.

Consulting revenue fell 12 percent to E476 million.

Dresdner Kleinwort Wasserstein in Frankfurt downgraded the stock to “hold” from “buy.” But Morgan Stanley said that SAP performed well in view of the global economic situation.

“As a trajectory, those revenues are a bit of a concern,” said Ross MacMillan, vice president at Morgan Stanley. “But the company is doing a phenomenal job of controlling costs. They’ve ratcheted costs down almost E140 million by cutting variable costs and without layoffs.”

The stock closed up E4.85 at E94.10 in Frankfurt.

The results are the last to be reported before Hasso Plattner, an SAP co-founder, steps down as chief executive next month.