Frankfurt: Germany’s SAP AG posted double-digit growth in first-quarter sales and operating profit, underscoring a rebound in corporate technology spending seen across the industry.
“We see the recession coming to an end and do believe there is sustainable growth,” Co-Chief Executive Jim Hagemann Snabe told Reuters Insider in an interview on Wednesday. He added he expects SAP to achieve double-digit growth in most regions, especially Asia.
Snabe and Bill McDermott took the reins at the company based in Walldorf in western Germany after a surprise management reshuffle in February in which Leo Apotheker quit after just seven months as sole CEO and the company returned to a split leadership structure.
McDermott said that the company had a strong pipeline of project requests for the second quarter and beyond, an indicator that the recovery in IT spending continued to filter through to SAP’s business.
SAP, whose more than 92,000 customers include companies such as McDonald’s, Pepsi, Audi, Apple and GE as well as institutions such as Johns Hopkins Hospital, bills itself as the world’s leading provider of software to help companies manage supply chains and customer relations.
It competes with US software companies Oracle, IBM and Microsoft, which also reported strong results on the back of improved demand. “We become increasingly optimistic that SAP is finally getting back to its growth path,” BHF Bank analyst Jochen Klusmann wrote, upgrading the stock to “buy” from “reduce”.
He added that Business ByDesign, SAP’s software for small and medium-sized companies whose launch was delayed several times, would be an additional growth driver. Snabe confirmed in a conference call that a broad rollout of the product was still planned for the middle of the year.
By 1207 GMT shares in SAP were down 1.5% in a lower DAX that had only four gainers. SAP said earnings before interest and tax (EBIT) in the first three months of the year rose a less-than-expected 47% to €557 million ($741.9 million) on an 11% increase in sales of software and software-related services to €1.9 billion.
Total sales were up 3% at €2.5 billion. Analysts polled by Reuters had forecast on average a 50% rise in operating profit to €615 million on total sales of 2.4 billion.
Sales from software and software related services were seen by analysts at €1.86 billion. SAP, which switched to IFRS reporting from US-GAAP, reiterated it expected 2010 non-IFRS software and software-related service revenue to increase by between 4% and 8% at constant currencies after a 5% decline last year.
It aims to reach a full-year 2010 non-IFRS operating margin in a range of 30% to 31% at constant currencies, up from 27.4% in 2009. “SAP showed a solid quarter in terms of revenues and licences,” Oliver Finger, analyst at DZ Bank, said. “We see an increasing momentum in terms of licence development, which makes us confident that demand is picking up. Maintenance revenues were also strong.”
SAP trades on a 12-month forward price/earnings ratio of 17.4 times, a premium to Oracle’s 14 and Microsoft’s 13.7, according to Thomson Reuters StarMine, which weights estimates by analysts’ previous accuracy.