Market-watchers were quick to seize on improved fourth quarter results from business applications vendors as evidence of a recovery in the industry. However, weak licence sales and a continued commitment to cost cutting suggest that economic conditions could still prove challenging for technology companies.
Europe’s largest software developer, SAP, was particularly bullish about the year ahead, forecasting sales growth of 15%. The enterprise resource planning vendor said that the bulk of the growth is expected in the second half of 2002, buoyed by an expected surge in license sales.
This upbeat announcement followed a healthy set of fourth quarter results marred only by a 2% fall in licence sales to just over €1 billion. Total revenues rose 7% to €2.3 billion compared to the same period in 2000. However, costs related to the acquisition of Top Tier and the impact of SAP’s 20% stake in loss-making US e-marketplace specialist Commerce One pushed net profits down 13% to €319 million. (For an analysis of the changing nature of the relationship between SAP and Commerce One, see Together forever?).
These costs, which totalled €200 million for the 12 months to December 2001, also eroded full-year figures. Net profits slipped 13% to €509 million despite a 17% boost in sales to €7.3 billion. Licence sales of SAP’s customer relationship management and supply chain management software, two of the main areas SAP is focusing on, performed particularly well.
Sweden’s enterprise resource planning vendor, Intentia, enjoyed a continued upturn in its fortunes. Sales climbed 31% to SEK1.3 billion (€141.5m) in the three months to December 2001. Licence sales were up 28% to SEK443.1 million (€48.2m), although licence orders during the period slipped 7% to SEK497.6 million (€54.2m).
Intentia surged SEK87.1 million (€9.5m) into the black, from net losses of SEK22.9 million (€2.5m) in the same period of 2000. For the year as a whole, the group met its target of posting an operating profit, and slashed net losses by 74% to SEK56.5 million (€6.2m). Sales jumped 24% to SEK4.0 billion (€440.0m).
In contrast, steep falls in quarterly revenues and profits at top-tier systems vendors revealed the extent of the decline in US corporate IT spending. Sales fell across almost all of IBM‘s divisions in the fourth quarter, pushing group revenues down 11% to $22.8 billion (€26.2bn). The systems giant attributed much of this decline to weak PC and server sales. Surprisingly, even revenues at IBM Global Services dipped 1% to $9.1 billion (€10.5bn).
Sun Microsystems reported even bleaker second quarter results to the end of December 2001. The systems vendor plunged $431 million (€301.8m) into the red from profits of $423 million (€296.2m) during the same period in 2000, a fall attributed to $511 million (€357.8m) in restructuring costs and a staggering 39% slump in revenues. Sun has been particularly affected by the demise of dot-com customers who still accounted for a large chunk of Sun’s sales in the closing quarter of 2000. Recognising this, Sun’s CEO Scott McNealy outlined plans to target more stable industry sectors such as healthcare, education and government.
Unisys, the server and services group, delivered the most optimistic interpretation of results. CEO Larry Weinbach talked of “signs of stabilisation in our US business”, where revenues slipped 7% for the three months to the end of December 2001. Total group revenues were down more than a third to $1.6 billion (€1.1bn), due to weakness in its international division, and in Japan and Latin America in particular. Falling margins and a $276.3 million (€193.5m) restructuring charge plunged Unisys $169.4 million (€118.6m) into the red from profits of $39.1 million in the same period in 2000. Its performance over the full year was only slightly less alarming: revenues were down by 13% to $6.9 billion, and losses hit $67.1 million compared to profits of $225.0 million in 2000.