Rencontres Economiques – By Fabienne Lissak and Kenneth Wong
Aix en Provence — SAP AG, the world’s largest maker of business-management software, said spending by European clients remains “healthy” and will help the German company reach a sales target in its home market this year.
“The growth is there,” Leo Apotheker, the deputy chief executive officer of Walldorf-based SAP, said in a July 7 interview in Aix-en-Provence, France. “I’m rather optimistic about the results that we can achieve in the coming months, and hopefully, in the next years, in Europe.”
In the first quarter, SAP got half its sales from Europe, a region where SAP has customers including Porsche AG and Alessi SpA, the Italian maker of designer kitchen ware. SAP, whose software helps companies manage payroll and inventory, may say on July 19 second-quarter sales rose 10 percent to 2.42 billion euros ($3.3 billion), analysts polled by Bloomberg estimate.
The economy of the 13 euro nations will expand about 2.6 percent in 2007, the European Central Bank said on June 6. The region’s economy grew 2.7 percent last year, the most since 2000. Last week, the U.K. said its economic growth accelerated in the second quarter.
Shares of SAP fell 21 cents, or 0.6 percent, to 36.75 euros in Frankfurt, after rising as much as 1.3 percent. The stock has dropped 11 percent in the past year, the worst performance among the 30 members of Germany’s DAX Index, which gained 40 percent.
In March, SAP put its European operations, previously run for two separate groups of countries, into a single unit for the whole region. Ernie Gunst was named to head sales in the region, reporting to Apotheker, who runs SAP’s global sales. France, the U.K. and the Nordic region are growing at “above” the average 10 percent for Europe, Gunst said in a May 14 interview.
In Germany, SAP’s goal for a “single-digit” percent growth rate in software and related services sales this year remains “realistic,” Apotheker said. Growth in the first quarter was 4 percent.
“Germany in terms of IT demand is in very good shape,” said Jonathan Crozier, a WestLB AG analyst in London who has a “reduce” rating on the shares. “Northern Europe seems to be doing better than southern Europe.”
In January, SAP forecast worldwide revenue from software and related services will rise 12 percent to 14 percent this year, excluding currency fluctuations. The margin on operating profit will drop as much as 1.3 percentage points as SAP plans to spend as much as 400 million euros over two years to expand sales to smaller companies.
SAP is betting the push will help bolster its customer base to 100,000 clients by 2010 and generate additional annual revenue of 1 billion euros from smaller clients. It will also help SAP reduce its reliance on larger corporations such as McDonald’s Corp. and Exxon Mobil Corp.
Apotheker rejected speculation that SAP may become an acquisition target, dismissing rumors that Oracle Corp., SAP’s main competitor, may be in the process of buying SAP shares.
“It’s a rumor and we don’t think it’s true,” he said.
Apotheker also reiterated that SAP’s founders remain committed to their holdings in the software maker. Supervisory Board Chairman Hasso Plattner, Klaus Tschira and Dietmar Hopp hold a combined 30 percent of SAP’s stock.