Germany's SAP Braced for Continued Currency Crunch

[Ammeo 10]

German business software maker SAP warned on Thursday that it expects the negative impact of the strong euro to worsen after reporting lower than expected first-quarter results.

 

The warning comes as SAP grapples with a short-term squeeze from its shift to web-based cloud computing, prompting it to push back its profit target as it waits for subscription income to gather pace and increases investment to keep up with the fast-growing market.

 

Along with many other European companies that rely on revenues from abroad, SAP has been hit by the climbing euro . The currency has gained 2.3 percent on the U.S. dollar and nearly 6 percent against Japan's yen in the past six months.

 

SAP said its software and software-related service revenues would fall 6 percentage points in the second quarter if exchange rates remain at March levels, while the hit for operating profit excluding special items would be 8 percentage points.

 

That compares with a first-quarter impact of 5 percentage points on both software and software-related service revenues and operating profit.

 

For the full year, SAP expects exchange rates to slice 4 percentage points from revenue and 5 percentage points from operating profit, though outgoing finance chief Werner Brandt said the company's global presence would give it opportunities to balance the currency effect.

 

The currency warning followed what one Frankfurt-based trader described as "a weak report" on the company's first quarter.

 

Its 2 percent rise in operating profit, excluding special items, to 919 million euros, missed even the most pessimistic forecast of 924 million euros in a Reuters poll of analysts. The average forecast was 961 million euros.

 

Shares in SAP fell 3.2 percent by 1056 GMT and are down almost 9 percent this year, against a 5 percent decline for the European technology index.

 

http://www.reuters.com/article/2014/04/17/sap-results-idUSL6N0N90XE20140417