Sunday, April 22, 2007

Improved sales boost SAP's quarterly profit nearly 10%

By Linda Loyd
Inquirer Staff Writer
SAP AG said yesterday that its first-quarter profit rose nearly 10 percent on improved sales, and the maker of business software vowed not to settle a lawsuit filed against it last month by rival Oracle Corp.

Germany-based SAP, which has a headquarters for the Americas in Newtown Square, said net income rose 9.9 percent to 310 million euros ($421.5 million), or 0.26 euros a share, in line with analyst expectations. That compared with 282 million euros, or 0.23 euros a share, a year earlier.

Revenue was up 6 percent to 2.2 billion euros ($2.99 billion) for the quarter from 2 billion euros in the first quarter of 2006. Analysts polled by Thomson Financial were expecting quarterly revenue of 2.2 billion euros.

Henning Kagermann, SAP's chief executive officer, said management was pleased with financial results. "On a constant-currency basis, we achieved a strong increase in software and software-related service revenues, and reported double-digit growth rates for each region," he said. The regions include Europe, the Americas (including the United States), and Asia-Pacific.

SAP said it continued to gain share in the $38 billion business-software market to 25.1 percent in the quarter ended March 31, up from 24.5 percent in the fourth quarter of 2006.

Bill McDermott, president and CEO of SAP Americas Inc. in Newtown Square, said software revenue was up 22 percent in the Americas, and 24 percent in the United States. "It was a very nice quarter," he said.

He predicted that demand for SAP's products would increase as companies grew and competed "more and more in a global economy" and standardized the management of their business on a software platform - everything from payroll to client orders, the supply chain to handling customers.

SAP is locked in a fierce rivalry and competition for customers with Oracle, of Redwood City, Calif.

During a conference call with analysts, Kagermann said SAP would vigorously defend itself in the coming weeks against Oracle's lawsuit, filed March 22, which accuses SAP of "corporate theft on a grand scale" and of stealing its software. Kagermann said SAP has no intention of settling.

Kagermann said SAP had a long legacy and "unparalleled reputation as a trusted adviser and a highly regarded partner." The company, he continued, "believes in the importance of intellectual-property rights, and we will aggressively defend against the claims made in this lawsuit."

He said the company would make a formal response in court in San Francisco to Oracle's allegations that employees of SAP's TomorrowNow Inc. subsidiary used log-in credentials of Oracle customers to access documents and software that Oracle uses to provide support services for its customers.

Kagermann said that "SAP and TomorrowNow are actively engaged in legitimate competition" and that "TomorrowNow's business success is all about customer choice. This lawsuit demonstrates that Oracle is trying to limit customer choices by trying to discredit the competition."

McDermott said: "We have a great brand. We respect other people's intellectual property, and we expect them to respect our intellectual property. We are a good partner, and our reputation is rock-solid. And we will, in the coming days, vigorously respond to this allegation, and the strength of our response will be clear and decisive."

SAP shares closed up $1.21, or 2.46 percent, at $50.39 on the New York Stock Exchange.

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