German business software maker SAP has reported a 49 per cent jump in fourth quarter net profit and said it increased its market share even as revenue dipped slightly.
Net profit for the quarter was €474 million (AU$871 million as of December 31, the last day of the period being reported), up from €319 million in the year-earlier period. Revenue dipped 2 per cent to €2.28 billion from €2.32 billion, but would have been up 5 per cent at constant currency rates, SAP said.
"IT budgets are tight but they are there," said Henning Kagermann, chief executive officer (CEO) and co-chairman of SAP. "There is a huge need for software."
As an example, Kagermann pointed to WorldCom, which recently signed a large contract with SAP "to increase efficiency in its operations".
WorldCom is a good example of a company "looking for quick solutions to address a number of pain points," said Leó Apotheker, president of global field operations at SAP.
Excluding extraordinary gains, the effect of losses at US partner Commerce One and other costs related to acquisitions and investments, net profit for the quarter rose 19 per cent to €492 million, SAP said.
The trend of smaller deal sizes continued in the last three months of the year, SAP said. Revenue from licence sales declined to €958 million from €1 billion a year ago, while revenue from maintenance contracts rose from €573 million in 2001 to €628 million in the fourth quarter of 2002, SAP said.
Consulting revenue for the period was up slightly at €575 million from €572 million and revenue from training slipped to €92 million from €117 million, SAP said.
But Kagermann said that while SAP's services business continues to grow, it will continue to take a backseat to products. "We are a product company," he said. "We want to increase our product sales. Our service sales will follow."
SAP claims to have increased its share of the worldwide business application software market to 50 per cent from 41 per cent in 2001, based on full year 2002 license revenue of €2.3 billion. SAP compares itself to i2 Technologies, JD Edwards, Oracle, Peoplesoft and Siebel Systems.
For the year 2002, net profit was €509 million, down from €581 million in 2001, SAP said. Excluding extraordinary gains, the Commerce One effect and other costs related to acquisitions and investments, net profit for the year 2002 is €1 billion, up 21 per cent from €851 million in 2001, SAP said.
Cost-cutting played a big role in the company's profitability, according to Kagermann. SAP cut personnel, reduced the number of external consultants, trimmed travel costs and rationalised its facilities by combining locations, he said.
"Despite our hiring freeze, we have hired people for product development and in some select areas of sales," Kagermann said. "All hiring must be approved by the board, and although we will hire people, we will do so very selectively."
Revenue for the year amounted to €7.4 billion, up one per cent from €7.3 billion in 2001.
"Although it is very difficult to make a long-term forecast, I believe the IT industry will return to double-digit growth once the economic slump is over," Kagermann said.