SAP Q3 net income rises 12%

SAP Q3 net income rises 12%

Frankfurt: German software company SAP AG said Wednesday its third quarter net income rose 12%, as a drop in revenue was partly offset with a lower tax rate and better margins.

SAP, based in Walldorf, said net income rose to euro435 million ($644 million) from euro389 million in the July-September period of 2008.

The company said total revenue fell, however, to euro2.5 billion from euro2.8 billion in the third quarter of 2008, a 9% decrease.

While the company saw a number of charges including restructuring costs related to job cuts, it saw an increase in operating income because of reversals of provisions it had set up for an acquisition. The net effect of the nonrecurring items was an increase in operating profit of euro2 million.

SAP said total income from continuing operations rose 6% to euro436 million.

The company’s tax rate also fell considerably, to 21% from 31.9% a year ago, because of acquisition-related items.

SAP said it expects a tax rate for the full year of around 27% to 28%, lower than the previously expected 29.5% to 30.5%.

The company said it was still seeing small deals, despite the tight market conditions, and that it was driving multiyear agreements with customers to ensure software and service revenues for longer periods. Still, SAP said it expects service revenues to decline by about 6 percent to 8% for the full year, from the euro8.6 billion in service revenues last year.

“We are pleased to report another quarter of increasing margins despite a decline in revenues. This demonstrates our continued success in maintaining tight cost controls," Werner Brandt, SAP’s chief financial officer said in the company’s report.

“While we are seeing signs of stabilization in the general environment, the market remains difficult. Third quarter software and software-related service revenues came in lower than we expected mainly because of a particularly challenging environment in the emerging markets and Japan," Brandt said.

Shares of SAP were up slightly at euro34.41 in Frankfurt morning trading.