SAP (SAP): Some Hope For Global Software Industry

Apps & Software

Published: January 28, 2009 6:01 am

Last Updated: April 28, 2020 4:25 am

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Earth Shares in large software companies including Microsoft (MSFT) and Oracle (ORCL) have been selling off quickly over the last two quarters. The general forecasts for the firms is that a slowdown in IT spending at enterprises and governments will undermine revenue and compress gross margins.

Those afflicted companies got a bit of a lift today as SAP (SAP), the second largest business software operation in the world, reported earnings that demonstrated the appetite for its products and services has not died.

SAP earnings rose 13% in the last quarter and profits were up over 15% to $1.1 billion. Part of the gain came from the SAP buyout of BusinessObjects, but the results were promising even with that factored in. SAP said it had little visibility for 2009, but it also indicated that it did not expect a huge drop in margins.

In short, SAP’s business is not going to hell even if it is getting a little soft.

Microsoft’s PC operating system revenue is under pressure since sales of its server and business products are essential for the firm to have any chance to post modest earnings this year. At Oracle, which sells virtually 100% of its software to enterprises, the SAP earnings must be a significant relief.

Tech is supposed to have some immunity to overall economic slowdown. That has not turned out to be the case, but SAP showed that its part of the tech world is comparatively robust.

Douglas A. McIntyre

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