SAP, the world's biggest maker of business software, is preparing for slight growth at best next year in licence sales as the global economic crisis continues to hurt its business, it said on Wednesday.
The German company scrapped its full-year revenue outlook and cut its profitability forecast three weeks ago, saying software sales had fallen off dramatically in the last two weeks of the third quarter.
"We're looking at all possible scenarios ... you can look at a decline in licence revenues, flat growth, maybe some small positive growth," co-Chief Executive Leo Apotheker told an investor conference in the Spanish city of Barcelona. SAP shares fell 0.9 percent to 26.21 euros by 0843 GMT, underperforming a flat European technology index.
Apotheker said SAP's priority would be to protect margins with a 200 mn-euro ($252 mn) cost-cutting plan that currently includes a hiring freeze and travel restrictions, but could be extended to include structural measures if necessary.
Like other IT and software companies, SAP had previously argued that it was insulated from the worst of the downturn because its products and services help customers save money. It said spending decisions by customers slowed in mid-2007 as they required authorisation from higher in their organisations, but until last month said those decisions were still being taken. Microsoft has also cut its outlook, though by less than the market had feared.
SAP's arch-rival Oracle, against whom it is defending itself in a drawn-out and bitter intellectual property lawsuit, will report results in December. Apotheker said SAP would now subsidise small and mid-sized enterprises -- among whom the fall-off in demand was most pronounced -- by helping them arrange financing and paying their interest for the first year.
Asked at the Morgan Stanley Technology, Media and Telecoms conference whether the measure had stimulated sales, he replied: "Let's put it this way -- there was a lot of demand for it."
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SAP said in a statement that it would reduce its operating margin outlook for the year because of the uncertain economic situation. SAP consultant and author Jon Reed provides career and market trends advice should approach BPX skills innovation" during challenging economic times.
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