Business software maker SAP on Tuesday reported strong second quarter revenue as sales of software and software-related services expanded, but the company's net profit declined due to charges related to its acquisition of France's Business Objects SA.
SAP reported a net profit of 408 million euro for the second quarter, down 9 percent from the same time last year. However, sales increased 18 percent year-on-year to 2.86 billion euro.
SAP also refined its full-year 2008 outlook to the top end of its former guidance, a sign business remains strong. The company now expects full year non-GAAP software and software-related service revenue to at the top end of the 24 percent to 27 percent range it had previously given. SAP's full year operating margin will also reach the upper range of the 28.5 percent to 29 percent range provided previously.
A strong deal pipeline was one reason for SAP's confidence, co-CEO Henning Kagermann said during a conference call Tuesday. "We feel despite all the toughness in the market, demand for SAP products is there."
The revised outlook figures do not include any negative impact from SAP's 4.8 billion euro acquisition of Business Objects, a deal that was finalized early this year. The purchase broke from SAP's traditional strategy of avoiding large acquisitions. But SAP said the deal would add thousands of new customers and a new product line in the fast growing BI (business intelligence) software segment.
As for the second quarter, software and software-related service revenues in the Americas were 662 million euro, up 17 percent; in Europe, the Middle East and Africa, 1,111 billion euro, a rise of 21 percent overall; and 288 million euro in Asia-Pacific, up 30 percent from last year.
The Asia-Pacific numbers were affected by a 9 percent growth rate in Japan, compared to 43 percent for other regions. SAP executives attributed the weakness in Japan to "operational issues" that have now been resolved. "We hope we can consider Q2 just a glitch," said co-CEO Leo Apotheker.
SAP executives had little new to say about the status of Business ByDesign, its on-demand offering for the midmarket. The company recently said it was scaling back roll-out plans for the product, to ensure it can deliver something high in both quality and profitability.
"We have continued to work on the product based on feedback we have received from our customers," Kagermann said.
"It's important to know that in all our outlooks and planning ... we were extremely conservative with regard to Business ByDesign," he said at another point.