SAP profit drops 6 percent in fourth quarter

Revenue for the fourth quarter totalled ?3.24 billion (US$4.77 billion as of Dec. 31, the last day of the period reported), up 10 percent from ?2.95 billion a year earlier, but net income fell 6 percent to ?756 million.

Software and related services revenue grew at 13 percent year on year, while consulting activities, representing around a fifth of SAP's revenue, remained stagnant.

For the full year, revenue rose to ?10.25 billion, up 9 percent from ?9.39 billion, while net income rose to ?1.92 billion, up 3 percent from ?1.87 billion.

The results do not include any revenue gains from SAP's $6.8 billion acquisition of French business intelligence software vendor Business Objects, which the companies only completed on Jan. 16, 2008, although they do include ?61 million in acquisition-related costs.

SAP's operating margin for the year fell from 27.4 percent in 2006 to 26.7 percent in 2007, but if the effects of exchange rate fluctuations and the company's investment in Business ByDesign were excluded, the operating margin would have risen to 28.2 percent, Chief Financial Officer Werner Brandt said in a conference call.

Developing Business ByDesign cost the company ?125 million in 2007, ?40 million of it in the fourth quarter, and the company expects to spend at least a further ?175 million in 2008. An additional ?50 million of expenditure will fall in late 2008 or early 2009.

Sales and related services for subscription-based products like the new ByDesign contributed just ?53 million in the fourth quarter, up 47 percent year on year.

Looking ahead, CEO Henning Kagermann expects mid-market products like ByDesign to boost growth in 2008, he said during the conference call.

Another growth driver will be SAP's acquisition of Business Objects, which will help the company increase its penetration of the business user sector, Kagermann said.

SAP expects full-year revenue from software and software-related services to grow at between 24 percent and 27 percent. Excluding the contribution of Business Objects, SAP's existing activities will contribute between 12 and 14 percentage points, the company said.