SAP Shares Fall After Earnings Trail Analysts’ Estimates

SAP AG, the biggest maker of business-management software, fell the most in six months after reporting earnings that trailed analysts’ estimates because of rising spending and slowing growth in the Americas.

Fourth-quarter operating profit excluding some items rose about 10 percent to 1.96 billion euros ($2.6 billion), the Walldorf, Germany-based company said today. Analysts had projected 2 billion euros, the average of estimates compiled by Bloomberg showed. Sales of new software licenses, an indicator of future revenue, also trailed projections.

Software-revenue growth in the Americas slowed to 3 percent from 37 percent in the preceding three months, signaling competition from archrival Oracle Corp. may have intensified. SAP had outgrown its peers in the past year, sending its stock up 50 percent last year.

“They had such good momentum through the last couple of months that now the market is disappointed if they don’t over-deliver,” said Heinz Steffen, a Fairesearch GmbH analyst in Kronberg, Germany, who advises adding SAP stock. “Fundamentally the results are OK, and they just have to get on with it.”

SAP fell 3.9 percent to close at 58.70 euros in Frankfurt, the steepest decline since July 6. Oracle declined 0.7 percent to $34.70 as of 12:43 p.m. in New York.

SAP is scheduled to give 2013 forecasts on Jan. 23.

New Businesses

Software-revenue growth in the Americas lagged behind gains of 23 percent in the Asia-Pacific and Japan region and 8 percent in Europe, the Middle East and Africa. Full-time employees rose by almost 8,700 during the year, equivalent to a 16 percent increase, and included more than 4,800 from acquisitions.

Co-Chief Executive Officers Bill McDermott and Jim Hagemann Snabe are trying to prove that new businesses such as Internet-based software can become dependable earnings generators to complement the traditional on-premises business.

“We invested significantly in key innovations while expanding our global go-to-market activities to further strengthen our mid-term growth ambition,” SAP Chief Financial Officer Werner Brandt said in the statement.

Last week, SAP unveiled an overhauled version of its flagship Business Suite software that runs on its Hana database, cutting the time required for transactions and analysis to a fraction. SAP aims to use the speed boost provided by its technology to increase its share in the database market, dominated by Oracle and International Business Machines Corp.

Sales of Hana totaled 390 million euros during the year, exceeding the company’s target of at least 320 million euros. SAP met its goal for revenue from mobile software, posting 222 million euros in sales in 2012. SAP’s cloud revenue jumped to 159 million euros in the fourth quarter.

Forecasts Aggressive

“SAP is clearly going for market share rather than margin optimization,” said Knut Woller, an analyst at Baader Bank AG in Munich who recommends investors hold SAP shares. “That’s why I think market expectations for the margin potential in 2013 are too aggressive.”

Analysts project the company’s adjusted operating profit to rise to 33.1 percent of revenue this year from 31.9 percent last year, according to estimates compiled by Vara Research GmbH. SAP targets a margin of 35 percent in 2015.

SAP and Redwood City, California-based Oracle have acquired companies that let clients rent software online rather than installing it on their premises. SAP in 2012 completed the acquisitions of SuccessFactors Inc. and Ariba Inc. to broaden its product range.

Software Spending

Sales of new software licenses in the quarter climbed 9 percent to 1.94 billion euros, compared with analysts’ 1.95 billion-euro projection.

Operating profit excluding some items and currency swings for the year reached 5.02 billion euros. The company had predicted 5.05 billion euros to 5.25 billion euros.

Adjusted software and software-related revenue grew 13 percent at constant exchange rates in 2012, compared with the upper end of a growth range of 10.5 percent to 12.5 percent that SAP projected in October. The increase includes contributions from SuccessFactors and Ariba.

Oracle last month reported quarterly sales and profit that beat analysts’ estimates and projected revenue excluding some items would rise in the three months ended February.

Spending on enterprise software may increase 6.4 percent to $296 billion this year, faster than the 3.3 percent growth pace recorded in 2012, Gartner Inc. said Jan. 3. The research firm also raised its overall estimate of spending on information technology, saying that uncertainty regarding an upturn in the world economy is “nearing resolution.”

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