Business

SAP earnings: Conditions improve, but uncertainty remains

SAP said it expects to return to revenue growth and deliver stronger profit margins in 2010 amid a gradual economic recovery. The company also said sales were rebounding in the U.

Written by Larry Dignan, Contributor Jan. 26, 2010 at 10:14 p.m. PT

SAP said it expects to return to revenue growth and deliver stronger profit margins in 2010 amid a gradual economic recovery. The company also said sales were rebounding in the U.S. and added that its on-demand Business ByDesign suite will be ready for volume deployments in mid-2010.

In an earnings statement, which didn't offer any surprises since SAP preannounced results, CEO Leo Apotheker said:

Along with margin expansion for 2010, we are also ready to return to top-line growth, although the market continues to be challenging and uncertainty among customers still exists.

The aim for SAP is to grow its core business and offer new technologies that speed implementation---think Business ByDesign, which will be ready for volume deployments in mid-2010.

In a presentation with investors, SAP noted that it expects subscription revenue to grow in 2011 because of its Business ByDesign suite for small and mid-sized businesses and on-demand extensions for large customers. The company will focus on fast growing regions such as Brazil, Russia, India and china.

SAP will also keep a tight lid on costs, according to SAP CFO Werner Brandt.

SAP said it expects software and software related service revenue to rise 4 percent to 8 percent in 2010. Operating margins will be between 30 percent and 21 percent.

By the numbers, SAP didn't offer many surprises. Under U.S. accounting, fourth quarter software and software related service revenue was euro 2.57 billion, down 4 percent from a year ago. Total revenue was euro 3.19 billion, down 9 percent from a year ago. Income from continuing operations was euro 750 million, down 13 percent from a year ago.

SAP touted a bevy of customer wins at companies like Deutsche Bank, 3M and Valero. Deutsche Bank is building a core banking system with SAP starting in 2010 under a multi-year pact.

Among the key charts:

The software revenue breakdown...