October 28, 2008 / 9:53 AM / 11 years ago

UPDATE 4-SAP scraps 2008 revenue outlook, shares slide

* SAP scraps 2008 outlook for revenue, quiet on 2009

* SAP says sees recession right now

* Shares down 1.9 pct after falling as much as 15 pct

(Adds sales chief comments, updates share price)

By Nicola Leske and Jim Finkle

FRANKFURT/BOSTON, Oct 28 (Reuters) - Software maker SAP (SAPG.DE) scrapped its 2008 revenue outlook and made no forecast for 2009 as the global economic crisis hurt demand for its software, sending its shares sharply lower on Tuesday.

SAP shares fell as much as 15 percent early in the day but later recouped some losses and were down 1.9 percent at 24.10 euros by 1504 GMT, underperforming a 5.2 percent gain in Germany's blue-chip DAX index .GDAXI.

“The lowered visibility will continue to be an overhang for now,” said Sarah Friar, analyst at Goldman Sachs.

“We still view street estimates for 2009 as too aggressive, but the buy-side is likely already at a recession-type scenario,” Friar said.

Analysts said the move, which SAP disclosed late on Monday, meant the world’s biggest maker of business management software was unlikely to meet its sales targets for the year. They said other software makers could also fall short.

Laura DiDio, an analyst with Information Technology Intelligence Corp, said there was “a good chance” SAP’s sales would miss targets this year.

“Any time somebody withdraws their guidance, it’s not good news. Certainly SAP is feeling the sting of the very harsh global economic climate,” she said.

SAP withdrew its full-year forecasts for non-GAAP software sales and software-related service revenues.

“We have to be realistic in terms of the external economic situation. We see a recession right now,” said SAP spokesman Saswato Das.

SAP sales chief Bill McDermott told Reuters on Tuesday the company had not deepened discounts for its software as the recession worsened and that SAP never offered discounts on its maintenance services.

McDermott also said SAP planned to implement cost cuts should it fail to meet its revenue target this year. But he said the company did not expect layoffs to be necessary.

SAP said on Oct. 6 business had suddenly fallen off in the last two weeks of its third quarter, which ended on Sept. 30.

At that time it said it would review its forecasts for the rest of the year and update investors when it released third-quarter results on Oct. 28. But the company ended up pulling its full-year forecasts altogether as it released its quarterly figures late on Monday, a day ahead of schedule.

MARGINS

SAP had previously expected after a strong second quarter to reach the upper end of its full-year 2008 software and software-related service revenue growth range of 24 percent to 27 percent at constant currencies.

The company had also forecast its full-year 2008 non-GAAP operating margin to be at the upper end of the range of 28.5 percent to 29 percent at constant currencies.

On Monday, it said its operating margin should reach around 28 percent, excluding a writedown related to an acquisition.

“We are confident that we can still deliver a margin of 28 percent because we run a very tight ship,” Das said, adding that SAP was reducing its cost base by 10 percent.

Investors are closely watching large software makers like SAP and Oracle Corp ORCL.O for signs that the global financial crisis could spark a meltdown in the technology industry.

Microsoft Corp (MSFT.O) last week cut its outlook, though less than feared. Oracle reports results in December.

SAP shares have lost 30 percent in value in the year to date and trade at around 11 times estimated 2009 earnings compared with a sector average of around 10. (Editing by Will Waterman)

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