SAP profit drops 6% in fourth quarter

SAP has reported a 10% rise in revenue for the fourth quarter, but earnings fell 6% compared to a year earlier, dragged down in part by the cost of launching Business ByDesign, a new offering for the mid-market, the company said today.

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SAP has reported a 10% rise in revenue for the fourth quarter, but earnings fell 6% compared to a year earlier, dragged down in part by the cost of launching Business ByDesign, a new offering for the mid-market, the company said today.

Revenue for the fourth quarter totalled €3.24bn (£2.54bn), up 10% from €2.95bn (£2.19bn) a year earlier, but net income fell 6% to €756m (£562m).

Software and related services revenue grew at 13% year on year, while consulting activities, representing around a fifth of SAP's revenue, remained stagnant.

For the full year, revenue rose to €10.25bn (£7.62bn), up 9%, while net income rose to €1.92bn (£1.43bn), up 3%.

The results do not include any revenue gains from SAP's £3.35bn acquisition of French business intelligence software vendor Business Objects, which the companies only completed on 16 January, although they do include €61m (£45.4m) in acquisition-related costs.

SAP's operating margin for the year fell from 27.4% in 2006 to 26.7% in 2007, but if the effects of exchange rate fluctuations and the company's investment in Business ByDesign were excluded, the operating margin would have risen to 28.2%, CFO Werner Brandt said in a conference call.

Developing Business ByDesign cost the company €125m (£93m) in 2007, and the company expects to spend even more in 2008.

Sales and related services for subscription-based products like the new ByDesign contributed just €53m (£39.4m) in the fourth quarter, up 47% year on year.

Looking ahead, CEO Henning Kagermann expects mid-market products like ByDesign to boost growth in 2008, he said.

Another growth driver will be SAP's acquisition of Business Objects, which will help the company increase its penetration of the business user sector, Kagermann said.

SAP expects full-year revenue from software and software-related services to grow at between 24% and 27%. Excluding the contribution of Business Objects, SAP's existing activities will contribute between 12 and 14 percentage points, the company said.

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