SAP says Q3 sales hit by crisis in financial markets

Computerworld - SAP AG last week warned that its third-quarter financial results will be below expectations because of a sales drop-off in late September -- a surprise occurrence that the software vendor blamed on the turmoil in the world's financial markets.

In a preliminary third-quarter announcement, SAP said that concern among corporate users over the financial meltdown "triggered a very sudden and unexpected drop in business activity at the end of the quarter."

SAP, which is scheduled to report its full results on Oct. 28, now expects software and related services revenue to total between €1.97 billion and €1.98 billion (about $2.7 billion U.S.). That would be an increase of as much as 14% over last year but less than the company had been expecting.

Henning Kagermann, SAP's co-CEO, said during a conference call with reporters and analysts that the vendor thought it would hit its original sales plan until the financial crisis worsened.

"We executed well during most of the third quarter," Kagermann said. But the economic woes are having "a strong impact on our ability to sign contracts," he added. "Many customers expressed the need to focus on shorter-term concerns and put planned IT investments on hold for now."

Kagermann disclosed that SAP is implementing some cost-cutting measures, including a reduction in temporary workers and a hiring freeze in which employees who leave won't be replaced.

Consulting firms Gartner Inc. and Forrester Research Inc. both forecast recently that despite the meltdown on Wall Street, IT spending will continue to grow, though at reduced rates.

And in a preliminary earnings announcement of its own, IBM didn't show any of the same ill effects that hit SAP. IBM, which plans to report its results on Thursday, said that third-quarter net income will be up 20% year-over-year and that it remains on track for profit growth of at least 22% for the full year.

Chris Kanaracus and James Niccolai write for the IDG News Service.

This version of the story originally appeared in Computerworld's print edition.

Got something to add? Let us know in the article comments.

Read more about Applications in Computerworld's Applications Topic Center.