REUTERS: Europe’s largest software company, SAP, warned late on Friday that first-quarter results would be weaker than expected due to slower sales of software licenses to corporate customers in the United States, its biggest market.
Software license revenues fell 13 percent while the company’s newer, but lower-margin cloud software business grew 33 percent. Business customers are shifting to cloud-based software delivered over the Internet instead of relying on older software packages they install and run on in-house computers.
First-quarter operating profit, excluding special items, rose 5 percent to 1.10 billion euros
(US $ 1.25 billion).
Analysts, on average, had been looking for a first-quarter operating profit, excluding special items, of 1.15 billion euros, with 12 estimates ranging from 1.09 billion to 1.25 billion euros, according to Thomson Reuters I/B/E/S data. The company also reported revenue of 4.73 billion euros, shy of the I/B/E/S average forecast of 4.83 billion euros.
The German company said it remains confident it can meet the full-year profit targets it had set out in January. It reiterated that it expects 2016 operating profit, excluding special items, to range between 6.4 billion and 6.7 billion euros (US $ 7.0 billion to US $ 7.3 billion) at constant currencies. That represents roughly flat growth to an increase of 6 percent.
Analysts, on average, project operating profit of 6.69 billion euros for the current year, according to 27 estimates compiled by Vara Research.
The quarterly results had been scheduled to be announced on April 20 but were announced early because they were materially lower than expected. The first quarter is SAP’s weakest period of the year and comes after a surge in results late last year, typically its seasonally strongest period.