SAP defiant despite revenue shortfall

Software revenues fell below expectations at the enterprise software specialist, but the company insists it's coping with the competition

Enterprise software vendor SAP has insisted it is not being knocked off course by rivals such as Oracle, Microsoft and Salesforce.com.

On Thursday, SAP published detailed financial results for the second quarter of this year. The company said that customer spending was stable, and that it was still winning business from competitors.

Just last week, SAP revealed in a preliminary results statement that its software revenues had totalled €621m for the quarter — an eight percent rise on last year's figures. Analysts, though, had forecast a 17 percent rise, and this shortfall sent SAP's share price tumbling.

Chief executive Henning Kagermann insisted on Thursday that SAP was "on track for a successful year".

"Software revenues were slightly below our expected full-year growth range, primarily due to order phasing and delayed contracts, but order entry — a key indicator for future software revenues — and our win rate against competitors both remained strong," said Kagermann.

Overall income in the quarter totalled €2.2bn, and operating profits for the quarter were up 15 percent at €531m.

Doubts remain over how well SAP will stand up to the threat of Oracle, which recently added Siebel to its collection of CRM vendors.

"They should be able to reach their targets for the next two quarters if they can keep up momentum, but it won't be an easy task," Gunnar Knierim, a fund manager at Pioneer Investments in Munich, told Bloomberg.

SAP is also facing up to the threat posed by Salesforce.com, which has pioneered the on-demand CRM application. Earlier this year, SAP launched its own hosted CRM package, which Kagermann cited as one of SAP's highlights of the year to date.

"We successfully delivered in the first half with new product launches such as SAP CRM on-demand solutions, Duet software and our flagship mySAP ERP 2005, the first services-enabled ERP suite in the industry. Customer feedback has been very positive on these products, including strong interest from our user groups about migrating to mySAP ERP 2005," Kagermann claimed.

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