Sales continue to plummet for SAP, but profit up

Applications giant SAP saw in its third financial quarter no end to the steep decline in software sales that has defined its year so far.

The company’s combined revenue fell 9% year-on-year to €2.5 billion during the three months ending September 30th 2009.

Software revenues (application license fees) fell 31% to €525 million. This follows software revenue declines of 40% and 33% in the previous two quarters.

That fall was balanced by a 14% rise in support revenue – SAP’s biggest earner – to €1.3 billion, and a 23% rise in subscription and other software-related services revenue, which includes sales of its SaaS offerings, to €64 million.

SAP saw net income grow by 12% to €435 million. Many IT companies have managed to grow profit as revenues fell in recent months, and while some of this can be attributed to their efficiency drives and widespread ‘restructuring’ (i.e. redundancy) programs, there is another effect at play that could spell trouble in future.

A significant cost of doing business for a software company is paying commission to its sales people. When there are fewer sales, the cost of doing business goes down and profit increases – in the short term. Of course, it also points to slower growth in future, as there will be fewer customers to charge for support

Pete Swabey

Pete Swabey

Pete was Editor of Information Age and head of technology research for Vitesse Media (now Bonhill Group plc) from 2005 to 2013, before moving on to be Senior Editor and then Editorial Director at The...

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