'Phantom stock' plan pulls down SAP profit

Share-based employee compensation programme helps pull SAP's annual profits down 18% in 2012, as sales grow 14%

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Phantom stock plan pulls down SAP profit

SAP's decision to link employee pay to its share price helped to pull profits down 18% in 2012, the company revealed today.

In May last year, SAP announced a 'shared-based compensation' programme in which employees are offered 'phantom stock' – a cash reward proportional to the company's share price.

It said at the time that it would help the company attract and retain talent. "This is an industry with war for talent, and talent is the biggest differentiator," said co-CEO Jim Snabe.

Today, though, it revealed that shared-based compensation – which includes both the employee scheme and executive compensation – cost the company €512 million during the year. SAP's share price grew by nearly 50% in the last year.

Added to acquisition-related costs of €537 million, this pushed the company's operating expense up 30% year-on-year to €12.2 billion. This meant that despite a 14% increase in annual revenue, up to €16.2 billion, the company's profit after tax fell 18% to €2.9 billion.

Software sales rose 13% to €4.7 billion for the year. Sales of the HANA database platform, a strategically critical bid to expand its reach beyond applications and middleware, totaled €392 million for the year.

SAP's cloud subscriptions and support revenue reached €270 million in 2012, up from €18 million in 2011 (i.e. before it had acquired SuccessFactors and Ariba). 

 “In 2012, SAP empowered best-run businesses to meet real-time consumer demands," said SAP co-CEOs Bill McDermott and Jim Hagemann Snabe. "We invested in our flagship innovation SAP HANA and strengthened the industry’s best portfolio in the cloud."

"We delivered industry-specific solutions, accessible anywhere on the mobile device. Our momentum has never been stronger. We are very well positioned to achieve our 2015 goals," McDermott and Snabe said.