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German business applications software maker SAP, Europe's clear software leader, reported a solid 8% jump in worldwide revenues for its final quarter of 2004, despite the negative impact of a weak dollar. (It would have been 11% at constant currency rates). Software sales were also up 8% worldwide (or 11% without currency fluctuation).

But when the underlying software sales are broken down by region, a really startling picture appears. Software revenues in SAP's Americas region surged to 27%. (If the company reported in dollars that would have been 37%.)

That showed the company streaking ahead of its main competitor, Oracle, in the US market, and gave it the confidence to predict a further 10% increase in software revenue for 2005.

SAP's bullishness is tempered by what is happening at its European division. Its fourth quarter results for the region show licence revenue flat compared to the year-earlier quarter. However, a rise in services revenues let SAP EMEA show overall growth for the quarter of 6%.

Meanwhile, the company's revenue split shows how its software base is maturing. Enterprise resource planning software accounted for 42% of software in the fourth quarter; customer relationship management brought in 22%; 20% came from supply chain management; and product lifecycle management and supply relationship management delivered about 7% of software licence revenue each.

Further signs of stagnation in the European technology market were visible at banking and healthcare applications maker Misys. In the six months ending November 2004, the UK-headquartered software maker reported a 7% fall in revenues to £437 million ($791m) down from £471.0 million ($852.7m) in the same period a year earlier.

While Misys points to currency fluctuations as a culprit for falling revenues, its performance was not helped by continuing weak demand in the European market, particularly in the banking sector, which Misys sees as its key customer base.

Misys has shielded itself from some of those negative impacts by growing its global markets, particularly in the Middle East and South Asia, but the company says it will try to readjust its mix of software and services revenue as a safeguard. Business demand for long term, complex projects delivering end-to-end processes is so entrenched that old sales models are outdated, notes Misys executives. As a result, it intends to increase its involvement in project services to compensate for lower up-front licence fees.

A billion a month

Technology powerhouse IBM has long realised the virtue of services revenues. In its most recent results for the quarter ending 31 December 2004, its Global Services unit accounted for nearly half of all revenues, helping to push profits for the quarter to above $3 billion for the first time.

Like other technology vendors IBM is experiencing turbulence in its business because of the continuing weakness of the US dollar. The company can point to solid growth in its full-year worldwide revenues, but the 8% rise looks less impressive when adjusted for currency fluctuations, taking it to just 4%.

Similarly underwhelming was the performance by IBM's hardware arm. Hardware revenues grew by only 1% in the fourth quarter of 2004, after currency adjustments. This poor showing was balanced, however, by an impressive growth in software revenues in the fourth quarter, with IBM's recently developed Tivoli and WebSphere platforms each generating revenue growths of 25% and 18% respectively, compared to the same period in the previous year.

Software giant Microsoft also reported a record-breaking quarter in the three months to the end of December. While revenues only grew by 7%, from $10.15 billion to $10.82 billion, cost cutting measures helped Microsoft post profits of $3.46 billion, more than double the $1.5 billion banked in the closing quarter of 2003.

While this jump in profits may attract investor plaudits, others are more interested in longer term trends. The surge in profits can be attributed to a slashing of R&D spending. Comparing like-for-like quarters, Microsoft cut its R&D spend by nearly 50%, taking it down to $1.44 billion from the $2.97 billion spent in the forth quarter for 2003.

That might hint that Microsoft is counting on acquisitions rather than investment as the source for new products and better growth. After all, the company has $35 billion available in cash even after handing out huge shareholder dividends.

And it can count on Windows to continue to act as a cash cow. The software maker's Client sales in the quarter (mostly Windows) totalled $3.2 billion with operating profits of $2.5 billion, an operating margin of 79%. The Information Worker unit (home to Office) is equally profitable and almost as large at $2.8 billion. Just behind it is Server and Tools where growth of 18% to $2.5 billion for the quarter-on-quarter helped take it back into the black.

Other units also found a profitable streak, including the previously loss-making entertainment and online divisions. But despite these encouraging signs, Microsoft is still a long way off from finding another Windows - hence its interest last year in acquiring SAP.