FRANKFURT: German business software maker SAP reported a 15 percent rise in operating profit helped by a cheap euro, even as rising investment in newer cloud-based software squeezed its profit margin.
Europe’s largest software company said first-quarter operating profit, excluding special items, rose to €1.06bn, matching the average expectation in a poll.
First-quarter revenue rose 22 percent to €4.5bn, helped by currency effects, solid business in European markets and the $7.3bn acquisition of Concur, the expenses software maker.
That beat the average analyst expectation of €4.25bn in the poll.
SAP shares are indicated to open 1.1 percent higher, outperforming the German blue chip index, which is seen opening 0.6 percent higher, according to premarket data from brokerage Lang & Schwarz.
“Top-line really strong, but bottom-line disappointing,” a Frankfurt-based trader said.
SAP’s results were in some ways the mirror opposite of US technology services giant IBM, which on Monday posted its twelfth quarter of revenue decline as it sheds unprofitable businesses to focus on cloud computing.
Excluding the effect of currencies, SAP operating profit dropped 2 percent, while operating margin fell to 23.5 percent from 24.8 percent in the same period last year. The declines were tied to stepped-up investments in newer cloud-based software, which requires higher initial costs, as revenue is recognised over time, squeezing short-term margins.
SAP is changing its business to deliver business planning software via cloud-based Internet services, rather than as packaged software running on customers’ in-house computers.
In the first quarter, new cloud bookings rose 121 percent to €120m from the same period in the previous year.
The company stuck to its outlook for the full 2015 year for non-IFRS operating profit of between €5.6bn and €5.9bn at constant currencies, which represents flat growth to a rise of as much as 5 percent from €5.6bn last year.Reuters
