SAP AG, the world's biggest maker of business-management software, reported its steepest quarterly profit decline in almost six years on acquisition-related costs and a weaker dollar.

Net income in the first quarter fell 22 percent to 242 million euros ($377 million), SAP said today. Analysts had predicted profit of 340 million euros, the median of seven estimates compiled by Bloomberg. Software license sales, a gauge of future consulting fees, rose 11 percent to 622 million euros, missing the 679 million-euro estimate in an analyst survey.
SAP fell the most in more three months. The dollar's slide created a ``huge currency headwind'' and the U.S. was ``tougher than expected,'' Chief Executive Officer Henning Kagermann said. SAP had 130 million euros in charges from the 4.8 billion-euro purchase of French rival Business Objects SA in February, and the company delayed its sales target for a new software product.
``Sooner or later the impact of the weak dollar hits the most efficient companies,'' said Boris Boehm, a management board member at Aramea Asset Management AG in Hamburg, which oversees the equivalent of $1.1 billion. ``The integration of Business Objects also seems to generate more problems than expected.''
SAP dropped as much as 2.15 euros, or 6.5 percent, to 30.90 euros in Frankfurt and traded at 31.56 euros as of 10:34 a.m. local time. Before today, SAP had lost 7 percent this year, less than the 15 percent slide in the benchmark DAX Index.
Tough euro
The euro advanced 8.4 percent against the dollar in the first quarter. The economic environment is ``tough,'' and the average deal size declined in the period, Kagermann said in a Bloomberg Television interview. The dollar's decline cut sales by 138 million euros, Chief Financial Officer Werner Brandt said on a call with journalists.
Oracle Corp., SAP's main competitor, reported on March 26 fiscal third-quarter sales that trailed analysts' estimates after customers delayed orders on concern that the U.S. economy is slowing. License revenue at Software AG, Germany's second-largest software maker, fell short of analyst estimates in the first quarter as the euro's strength hurt sales.
SAP's first-quarter software and related service revenue rose 15 percent to 1.74 billion euros, missing analysts' estimates. SAP predicted in January software and related service revenue would rise 12 percent to 14 percent in 2008, excluding Business Objects and currency swings.
SAP said it will take about 12 months to 18 months longer than the original 2010 target until the subscription-based Business ByDesign software reaches $1 billion in sales and 10,000 customers. SAP remains ``totally committed'' to the product, Kagermann said.
``A slower than planned rollout of Business ByDesign may have negative implications for revenue growth in 2009 and 2010,'' Stacy Pollard, an analyst at JPMorgan Cazenove Ltd. in London, wrote in a note to customers today. The brokerage has an ``outperform'' recommendation on the stock.
SAP products help clients including Porsche SE and Home Depot Inc. manage corporate functions including payroll and inventory. The German company promoted Leo Apotheker to co-CEO alongside Kagermann on April 2. Apotheker will become the sole CEO when Kagermann retires in May 2009.
SAP is returning to a double leadership as it digests the Business Objects takeover and rolls out new subscription-based software to help maintain its lead over Redwood City, California- based Oracle. Kagermann ran SAP with company co-founder Hasso Plattner before Plattner moved to the supervisory board in 2003. Targets at Risk?
SAP raised its operating margin forecast, before some items and at constant currencies, to between 28.5 percent and 29 percent this year, up one percentage point from a guidance given in January.
SAP also plans to cut research and development spending as a percentage of sales to between 11 percent to 12 percent from 14 percent now, Kagermann said April 3. Other goals include expanding the market for its products to about $75 billion by the end of 2010.
``We see the risk that the full-year growth targets could be missed,'' Knut Woller, an analyst at UniCredit Markets and Investment Banking in Munich wrote in a report. He has a ``buy'' recommendation on the stock and cut his share-price estimate for SAP by 16 percent to 42 euros today.
(Source: Bloomberg)