Update: SAP to deliver fast ROI products and cut staff

SAP is focussing new product launches on delivering fast ROI to its customers, and intends to reduce its global workforce to 48,500 staff by the end of this year, it said today (28 January).

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SAP is focussing new product launches on delivering fast ROI to its customers, and intends to reduce its global workforce to 48,500 staff by the end of this year, it said today (28 January).

The company currently has more than 51,800 employees worldwide, according to its Web site. The staff cuts will result in annual cost savings of €300 million to €350 million beginning in 2010, SAP said.

SAP's net income for the full year 2008 dropped 2 percent year on year, to €1.89 billion, even as total revenue for the year grew 13 percent to €11.6 billion (US$16.3 billion as of Dec. 31, the last day of the period reported).

Despite the dip in full-year net income, SAP posted strong figures for the fourth quarter: Revenue from software and software-related services rose 8 percent year on year to €2.67 billion, while total revenue for the quarter was €3.5 billion, also up 8 percent. Net income for the quarter rose 13 percent to €850 million.

For the full year, software revenue totalled €3.61 billion according to U.S. GAAP (generally accepted accounting principles), representing an increase of 6 percent over the previous year, SAP said.

The results include gains from January 21 last year from SAP's acquisition of French business intelligence software vendor Business Objects.

SAP said it expects the operating environment to continue to be challenging during the current year. It warned that a comparison between 2009 and 2008 may be difficult as the company posted strong results in the first half of 2008, before the economic crisis disrupted global markets.

The company said it would not provide a specific outlook for revenue from software and software-related services for 2009 because of the continued uncertainty surrounding the economic and business environment.

Léo Apotheker, co-CEO of SAP said, “In 2009, we will continue to deliver to customers products targeted at specific business processes to alleviate pain points caused by the challenging environment since customers need flexibility, agility and visibility into their businesses now more than ever. These products are designed for fast implementations and quick returns on investment.”

One product from which SAP is still struggling to extract the margin it wants is Business ByDesign, its on-demand offering, for which the cost of hosting and delivering the service was higher than expected.

"Our main focus is reducing operating costs," said Apotheker. "It's not just a product but also a process of supplying that product through the network, so we are adapting the value chain so that we can be profitable everywhere. Adapting takes some time."

Apotheker glossed over complaints from some user groups about the company's recent increase in maintenance fees, saying that the new price is "customary" for the industry, for a level of service that is "unusual." The company's new products and services will help it gain market share, he said.

The economic crisis means SAP is having trouble getting some customers to pay their bills: The company's "days sales outstanding," a measure of the average time it takes a customer to pay an invoice, has increased to 71 days, from 66 in 2007. SAP will try to reduce the figure in 2009, said Brandt.

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