FRANKFURT (Reuters) - The weaker euro boosted revenue at German business software maker SAP in the first three months of the year and drove operating profit up 15 percent, although a rise in newer cloud-based software sales squeezed margins.
Europe’s largest software company said on Tuesday its first-quarter operating profit, excluding special items, rose to 1.06 billion euros ($1.13 billion), matching the average of forecasts given by analysts in a Reuters poll.
First-quarter revenue rose 22 percent to 4.5 billion euros, at the top of market forecasts, boosted both by the weaker euro and the $7.3 billion acquisition of Concur, the online staff travel and expenses manager.
At constant exchange rates sales rose 10 percent.
Shares in SAP were 2.7 percent higher at 1430 GMT, slightly underperforming the STOXX Europe 600 Technology sector index <0#.SX8P>, which was up 2.6 percent.
Excluding the effect of currencies, SAP’s operating profit dropped 2 percent, while operating margin fell to 23.5 percent from 24.8 percent in the same period last year.
The declines reflected increased investments in SAP’s newer cloud-based software services, where revenues from new sales come later in the form of subscription payments.
SAP eked out 1 percent growth in license sales for its mainstay packaged software business, which analysts said reversed four quarters of declines in the key metric of its core business performance.
“Results and the stock have been helped by FX but that is only part of the story,” Mark Moerdler, an analyst at Sanford Bernstein, said in a research note.
“SAP is starting to deliver with cloud strength combined with stability in the core on-premise license & maintenance revenue,” said Moerdler, who has an “outperform” rating on the stock.
SAP’s results were in some ways the mirror opposite of U.S. technology services giant IBM, which on Monday posted its 12th quarter of revenue decline as it sheds unprofitable businesses to focus on cloud computing.
SAP is battling alongside established U.S. software makers such as Oracle, IBM and Microsoft to boost internet-based software sales and fend off pure cloud-based rivals Salesforce.com, Workday and, less directly, industry pacesetter Amazon.com’s Web unit.
Comparable numbers are hard to come by to judge who is winning the fight. Pure-play cloud firms are enjoying spectacular revenue growth but profit margins remain low to non-existent. However they have huge levels of unbilled, deferred revenue building up that promise to boost future profits.
Oracle and SAP remain in the early stages of moving to the cloud and are battling each other with competing claims over which company will emerge as the second-biggest provider of cloud-based business software, a market where Salesforce remains far out in front.
SAP said it expects to produce around 2 billion euros ($2.14 billion) in cloud software and services revenue in 2015 and aims to quadruple that number by 2020, when around 30 percent of its total revenue will come from the cloud.
The company stuck to its outlook for the full year for non-IFRS operating profit of between 5.6 billion and 5.9 billion euros at constant currencies, which represents flat growth to a rise of as much as 5 percent from 5.6 billion euros last year.
Including the effect of the weaker euro, which makes the multinational software maker’s products and services more competitive outside Europe, second-quarter operating profit is expected to grow as much as 18 percent, the company said.
That is slightly lower than SAP’s prediction last month for profit to rise by 19 percent, reflecting the modest strengthening of the euro since then.
($1 = 0.9349 euros)
Editing by Louise Heavens and Greg Mahlich