* Q1 core operating profit 901 mln euros vs 968 mln expected
* Still sees 2013 operating profit at 5.85-5.95 bln euros
* Says has won market share from Oracle
* Shares underperform main market
By Harro Ten Wolde
FRANKFURT, April 19 SAP AG's Asian
business stumbled at the start of 2013 when top sales managers
left the business software company, giving rivals an edge just
as customers were switching from hardware to cloud computing.
The German company vowed to get its Asia Pacific business
back on track after the problems pushed its first-quarter
earnings and revenue below analyst forecasts. Its shares fell
2.8 percent on Friday.
SAP and rivals such as IBM and Oracle are
dashing to meet surging demand for cloud computing, which allows
clients to reduce costs by ditching bulky and costly servers for
network-based software and storage in remote data centres.
With the cloud services market forecast to grow 18.5 percent
this year to $131 billion worldwide, according to research firm
Gartner, competition is fierce and software firms face a
challenge to adapt.
"We had some leadership changes in the region. That is why
we saw some misses in the quarter," said SAP's co-Chief
Executive Jim Hagemann Snabe.
He promised the Asia Pacific region would be back on track
in the second quarter as the sales pipeline looked good and
important sales positions were now taken care of.
SAP shares were down 2.8 percent at 57.95 euros by 0932 GMT,
while a broader index of European technology companies
was down 0.7 percent.
The biggest disappointment in SAP's quarterly results was
SAP's performance in the Asia Pacific Japan region (APJ), said
Stacy Pollard, an analyst at JP Morgan.
Its software and cloud subscription revenue there declined 7
percent, lagging the Americas, where revenue jumped 49 percent,
and Europe, the Middle East and Africa, where it grew 13
"While weakness from other software and IT services names
over the last month had already pushed down expectations (and
the SAP share price), we would still expect another 3 to 4
percent correction to shares today," Pollard said.
SAP software helps companies to manage supplies, human
resources and customers relations. It is reducing its reliance
on traditional business software to become a major player in
Snabe said the industry was transforming as customers turned
to web-based software products.
"Hardware is in trouble," he told Reuters Insider.
SAP faces competition in Internet-based software from IBM
and Oracle and nimbler rivals like Salesforce.com Inc
and Workday Inc. It spent $7.7 billion last year to buy
Internet-based computing companies Ariba and SuccessFactors.
Its main competitor, Oracle, reported a 2 percent drop in
software sales in its fiscal third-quarter ended in February.
SAP said it had snatched market share from Oracle and others
as customers turn to cloud services, which are seen as less
vulnerable to the global economic downturn as there are no
upfront costs for programme licences, hardware or installation.
SAP said it still expected operating profit this year to be
5.85 billion to 5.95 billion euros ($7.65-7.78 billion) at
constant currencies, up 12-14 percent from 5.21 billion in 2012.
"Given the ... weak results from competitors, we would not
overemphasize the first-quarter results," said Oliver Finger, an
analyst at DZ Bank, who rates the stock a "buy". "Moreover, the
first quarter is traditionally the least important quarter for
SAP and the company remains confident overall."
SAP's first-quarter operating profit excluding special items
rose 8 percent to 901 million euros, missing an average forecast
of 968 million in a Reuters poll of analysts.
Revenue was also up 8 percent at 3.64 billion euros, but
missed even the most pessimistic estimate in the Reuters poll,
where individual estimates ranged from 3.73 to 3.9 billion.