http://dailynews.yahoo.com/h/nm/19991019/tc/sap_warning_1.html

Link

Tuesday October 19 8:45 AM ET

SAP Eyed Warily After Profit Warning

By Michael Able

STUTTGART (Reuters) - Analysts are anxiously awaiting SAP AG's (NYSE:SAP - news) third quarter results Wednesday after the leading European business software provider shocked the market last week with a profit warning for the full year.

Cutting its 1999 sales growth forecast to 15-20 percent from 20-25 percent, SAP announced that sales in the third quarter had risen only seven percent compared to the 43 percent sales growth enjoyed in the third quarter of 1998.

Analysts are worried about how much the weaker sales growth may have weighed on earnings in the three months July-September and say this is hard to estimate because of the considerable amount of fixed costs that SAP includes in its accounts.

``The current time is not especially good for software providers,'' said HypoVereinsbank analyst Peter-Thilo Hasler.

Hasler, who rates SAP underperform, expects the group to record third quarter pre-tax profit of 235 million euros ($254.3 million) compared to 221 million euros in the year-ago period.

But he adds that earnings could be even as much as 50 million euros less than he has calculated.

Software Market Soft Ahead Of Millennium

Jochen Klusmann at Bank Julius Baer, who rates SAP as ''buy,'' said he was not surprised by SAP's profit warning due to the current state of the global software market as businesses hesitate to buy new programs ahead of the millennium.

Klusmann sees SAP's third quarter pre-tax profit falling to 165 million euros.

Some analysts say SAP's business has been hurt by a general slowdown for Y2K products as most businesses are prepared for the computer bug. They also say companies have put off making major investments in new software products until next year.

Other analysts say SAP is pressured because it did not secure quickly enough a place in the fast-growing market for Internet-compatible software products to ensure sales momentum.

SAP's profit warning last week knocked its shares down 10 percent in an initial knee-jerk reaction to the news.

While the stock has trimmed its losses slightly since then, SAP is still around one month lows and below 400 euros.

HypoVereinsbank's Hasler said he does not expect SAP shares to improve much in the next four to six months.

He sees SAP's 1999 pre-tax profit growing four percent to 1.019 billion euros, while sales will rise 15.5 percent to about five billion euros.

Klusmann sees this year's sales up 17 percent and pre-tax up nine percent. Next year he expects further improvement with sales rising 22 percent and pre-tax up 24 percent.

Dutch business software supplier Baan is expected to report another loss when it gives its third quarter figures Thursday.

Analysts said the entire enterprise resource planning (ERP) sector has had a tough year, although the problems of Baan, Europe's number two behind SAP, appear more acute than most.

Make a name for yourself online!

-- Homer Beanfang (Bats@inbellfry.com), October 19, 1999

Answers

SAP 3Q net income falls 64 percent

Shares slide as figures confirm analysts' worst fears

Doesn't Hoffmeister work for this company? (... that figures).

-- @ (@@@.@), October 20, 1999.

Nope. SAP doesn't pay nearly enough.

-- Hoffmeister (hoff_meister@my-deja.com), October 20, 1999.

I've hauled SAP people and SAP-Partners People and SAP folks were quite CLEARLY not as well off as the Partner Company people, both personally and in terms of the expense account (tips, m' man, tips) Chuck

-- Chuck, a night driver (rienzoo@en.com), October 20, 1999.

Homer,

No offense, but so what? Read the other day Microsoft was worried also about people buying their new 2000 operating system when they release it late this year or next Jan. This is to be expected. Yes, it will affect a few software firms if sales decline for a few weeks or couple of months, but what about the other side of the coin? How much might business pick up when companies take their plans off "hold" after they see what Y2K brings? I've talked to many who tell me there is LOTS of pent up demand out there for new systems and projects, but companies are "playing it safe"/CYAing "just in case" Y2K lives up to a shadow of its hype. Think this is just a temporary fluctuation, not any cause for gloom and doom....just gotta roll with the punches, and go with the flow...if anything, anybody laid off due to this "wait and see" approach would have only doomers to "blame" for their "time off" after Y2K turns out NOT TO BE TEOTWAWKI, IMO!!

Best wishes,

-- Genius (codeslinger@work.now), October 20, 1999.