SAP raises outlook inspite of slump

Software giant SAP raised the outlook for its 2009 operating margin due to costs saving measures as its second-quarter results beat expectations.

But the world's largest maker of business management software has cut its software and software-related services revenue outlook. Sales are now expected to fall by between four and six per cent, compared with a previous expectation of a fall of one per cent lower than the 2008 figure of €8.6 billion (£7.42 bn).

Interviewed on CNBC Europe, SAP chief executive Leo Apotheker said the worst is behind SAP, and the company expects economic recovery next year.

Net income in the quarter of €423 million (£365m) was better than analysts’ expectations and compares with €408 million in the same period last year. And SAP raised its forecast for its operating margin to range between 25.5 per cent and 27 per cent on a constant currency basis. Previously 25.5 per cent was the top end of the target range.

The company has also started a programme of reducing its global headcount to 48,500 by year-end through redundancies and attrition. The company today said it expects one-time restructuring charges of between €200 million for 2009. In the first six months it has booked €165m in restructuring charges as it cut 2,800 staff.

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“Despite the challenging economic conditions, the strength of our business model combined with a strong cost discipline has proven itself once again by enabling us to report another quarter of strong operating margin growth,” said Werner Brandt, CFO of SAP.

“For the remainder of the year, we expect to maintain tight cost controls in all areas of the company.”

In June, the company announced a major overhaul of its software offerings that would see it roll out a software as a service (SaaS) option to its "Large Enterprise on Demand" offering. End user organisations will be able to integrate SAP’s online offerings with their core, on-premises or hosted ERP platforms. SAP's current Large Enterprise on Demand applications include CRM on-demand and e-sourcing, with expense management set for a 2010 release.