* Says operating profit will be hit by 8 percentage points
* Full-year profit would fall 5 points at March forex rates
* Q1 operating profit misses analysts' expectations
* Shares down 3.2 percent
(Repeats with link to related story)
By Harro Ten Wolde
FRANKFURT, April 17 German business software
maker SAP warned on Thursday that it expects the
negative impact of the strong euro to worsen after reporting
lower than expected first-quarter results.
The warning comes as SAP grapples with a short-term squeeze
from its shift to web-based cloud computing, prompting it to
push back its profit target as it waits for subscription income
to gather pace and increases investment to keep up with the
Along with many other European companies that rely on
revenues from abroad, SAP has been hit by the climbing euro
. The currency has gained 2.3 percent on the U.S. dollar
and nearly 6 percent against Japan's yen in the past
SAP said its software and software-related service revenues
would fall 6 percentage points in the second quarter if exchange
rates remain at March levels, while the hit for operating profit
excluding special items would be 8 percentage points.
That compares with a first-quarter impact of 5 percentage
points on both software and software-related service revenues
and operating profit.
For the full year, SAP expects exchange rates to slice 4
percentage points from revenue and 5 percentage points from
operating profit, though outgoing finance chief Werner Brandt
said the company's global presence would give it opportunities
to balance the currency effect.
The currency warning followed what one Frankfurt-based
trader described as "a weak report" on the company's first
Its 2 percent rise in operating profit, excluding special
items, to 919 million euros, missed even the most pessimistic
forecast of 924 million euros in a Reuters poll of analysts. The
average forecast was 961 million euros.
Shares in SAP fell 3.2 percent by 1056 GMT and are down
almost 9 percent this year, against a 5 percent decline for the
European technology index.
The longer-term picture from the move to cloud computing
looks more encouraging, however.
Competing with global rivals such as IBM and Oracle
in the race to meet surging demand for web-based
software, SAP said revenues from its cloud business jumped by
more than a third to 221 million euros out of total
first-quarter revenue up 2 percent at 3.7 billion euros.
The global cloud services market grew by almost a fifth last
year to an estimated $131 billion, research firm Gartner says,
while IBM Markets Intelligence says the market could be worth
$200 billion by 2020.
SAP customers, such as Coca-Cola, McDonald's
and Vodafone, are moving to cloud computing because
there are no upfront costs for program licences, dedicated
hardware or installation, making them less vulnerable to
SAP entered the cloud business in 2012 after spending $7.7
billion - about 10 percent of its current market capitalisation
- to buy internet-based computing companies Ariba and
The company expects last year's total revenue of 16.9
billion euros to rise to at least 22 billion euros by 2017, with
the cloud business contributing up to 3.5 billion euros.
Cloud operations accounted for 787 million euros of last
year's revenue and analysts have suggested that SAP will need to
make more acquisitions to reach its 2017 goal.
Chief Executive Bill McDermott has indicated that he would
look at potential deals but on Thursday said he was not in "hot
pursuit" of possible targets.
At constant currencies, SAP still expects full-year
operating profit of between 5.8 billion euros and 6 billion
euros, against 5.51 billion euros last year.
McDermott said the company achieved a solid performance in
Europe despite uncertainty in Russia, with the Ukraine crisis
having a dampening effect on its activities in the region.
"We do see that some things are moving slower there and they
are growing less fast than they were, but nothing is lost and we
expect the business to be restored over time," he said.
($1 = 0.7243 Euros)
(Editing by Maria Sheahan and David Goodman)