Market Share Grows At SAP, Though Software Revenue Is DownMarket Share Grows At SAP, Though Software Revenue Is Down

The future could be even brighter if SAP can sway to its side PeopleSoft customers worried about an Oracle takeover.

Beth Bacheldor, Contributor

July 17, 2003

2 Min Read
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Although SAP AG managed to boost its operating margins for its second quarter of 2003, the down economy and slowed IT spending hurt sales at the No. 1 enterprise applications vendor.

SAP's total revenue was $1.83 billion, an 8% decrease from $1.98 billion in the same quarter last year. Net income was $244.7 million, down from $259.3 million the same time last year.

Software revenue dropped 13% to $481.6 million, from $554.2 million the same quarter a year ago. Despite the drop, the company says it continued to gain market share, keeping it in the top spot. On a rolling four-quarter basis, SAP's worldwide market share was 55%, compared with 45% at the end of the second quarter of 2002, the company said.

SAP's operating income increased 6% to $379.9 million, up from $357.5 million the same period last year. Its operating margin was up three percentage points compared with the second quarter of 2002.

In a statement released today, SAP CEO Henning Kagermann acknowledged the tough economy, but said SAP "executed better than most of our competitors." Kagermann said SAP will continue to invest in products and evolve "our business to meet the requirements of a changing industry environment."

SAP also expects to grab new business from the battle between Oracle and PeopleSoft. Oracle is still pursuing its hostile $6.3 billion takeover bid, and industry experts expect some PeopleSoft customers to consider buying SAP's software rather than have to move to Oracle's enterprise applications framework in the future.

The company didn't provide revenue expectations for future quarters, but did adjust its pro forma operating margin expectations. Previously, SAP had expected its 2003 pro forma operating margin to increase by around 1 percentage point compared with 2002, but now expects its 2003 pro forma operating margin to be between 1 and 1.5 percentage points higher than the level achieved in 2002 through continued market share gains and cost containment.

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