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| A SAP logo is seen at its offices in the CityWest complex, Dublin September 5, 2013. Picture taken September 5, 2013. To match Special Report TAX-SAP/ |
German business software maker SAP (SAPG.DE)
on Monday cut its outlook for full-year operating profit amid an
accelerating shift by customers to buy its software over the Internet
rather than as packaged software, delaying recognition of those sales.
SAP said it now expects 2014 operating profit, excluding some special items, of 5.6 billion to 5.8 billion euros ($7.1-7.4 billion), down from 5.8-6.0 billion euros previously.
SAP reported a 5 percent rise in third-quarter operating profit, excluding special items, to 1.36 billion euros, which was slightly below average expectations of 1.37 billion euros, according to a Reuters poll of analysts.
SAP shares were indicated to open 2 percent lower, underperforming the German blue chip index .GDAXI, which is seen gaining 0.4 percent in early Monday trading.
Company executives said the accelerating switch from license-software sales to Internet-based, so-called cloud software, is to cut into its 2014 profit, but that these sales would begin to bolster revenue and profit in coming quarters.
SAP specializes in providing a mix of business application software for companies, but has come under pressure from cheaper rivals that offer services over the Internet, or "the cloud".
"De-accelerating in the cloud would make absolutely no sense," SAP finance chief Luka Mucic said on a conference call. "We are hitting the gas pedal as much as we can," he said. "We will then see the positive returns in the longer run."
SAP said orders for cloud-based software now represent more than one-third of the revenue it receives from its classic packaged software business.
Packaged software sales are recognized immediately, while cloud orders are booked as sales over the life of a multi-year contract, which officials said explained its lowered profit outlook for the rest of 2014.
SAP's multinational customers, which include Coca-Cola (KO.N), McDonald's (MCD.N) and Vodafone (VOD.L), are moving to cloud computing because there are no upfront costs for software licenses, dedicated hardware or installation, giving the customers more flexibility to respond to shifting market demand.
SAP said the company now expects 2014 cloud business revenues to range between 1.04 billion to 1.07 billion euros, up from a previous forecast of 1 billion to 1.05 billion euros.
source
SAP said it now expects 2014 operating profit, excluding some special items, of 5.6 billion to 5.8 billion euros ($7.1-7.4 billion), down from 5.8-6.0 billion euros previously.
SAP reported a 5 percent rise in third-quarter operating profit, excluding special items, to 1.36 billion euros, which was slightly below average expectations of 1.37 billion euros, according to a Reuters poll of analysts.
SAP shares were indicated to open 2 percent lower, underperforming the German blue chip index .GDAXI, which is seen gaining 0.4 percent in early Monday trading.
Company executives said the accelerating switch from license-software sales to Internet-based, so-called cloud software, is to cut into its 2014 profit, but that these sales would begin to bolster revenue and profit in coming quarters.
SAP specializes in providing a mix of business application software for companies, but has come under pressure from cheaper rivals that offer services over the Internet, or "the cloud".
"De-accelerating in the cloud would make absolutely no sense," SAP finance chief Luka Mucic said on a conference call. "We are hitting the gas pedal as much as we can," he said. "We will then see the positive returns in the longer run."
SAP said orders for cloud-based software now represent more than one-third of the revenue it receives from its classic packaged software business.
Packaged software sales are recognized immediately, while cloud orders are booked as sales over the life of a multi-year contract, which officials said explained its lowered profit outlook for the rest of 2014.
SAP's multinational customers, which include Coca-Cola (KO.N), McDonald's (MCD.N) and Vodafone (VOD.L), are moving to cloud computing because there are no upfront costs for software licenses, dedicated hardware or installation, giving the customers more flexibility to respond to shifting market demand.
SAP said the company now expects 2014 cloud business revenues to range between 1.04 billion to 1.07 billion euros, up from a previous forecast of 1 billion to 1.05 billion euros.
source
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