SAP reported first quarter net income down 16 percent year on year, and revenue down 3 percent, as customers remain reluctant to spend on new software.
Net income for the first quarter fell to EUR204 million (US$269 million as of March 31, the last day of the period reported) from EUR242 million a year earlier. SAP blamed the fall on a restructuring charge related to previously announced staff lay-offs.
Revenue fell to EUR2.40 billion from EUR2.46 billion a year earlier. Within that, software support revenue rose 18 percent to EUR1.25 billion, a rise somewhat offset by a fall in professional services revenue, down 9 percent to EUR649 million.
The biggest fall was in software sales, down 33 percent to EUR418 million. SAP blamed the decline on a difficult operating environment worldwide due to the global economic downturn.
It is unclear when buyers will regain confidence: "Visibility for software revenues remains limited," SAP said.
The company declined to comment further on the outlook for the rest of the year, sticking to the same forecast it provided in January. Back then it made no predictions for future revenue, citing uncertainty about the business environment.
However, SAP will have slightly lower software support revenue in the coming years than it had previously hoped. Following pressure from users, announced Wednesday that it has capped the price of its new Enterprise Support program at 22 percent of the software license price until at least 2015.
For existing users forced to migrate to that service from a cheaper existing service, the price rise will be spread over a longer period, limiting increases to 3.1 percent a year, rather than the previous 8 percent a year, SAP said.
SAP repeated its January prediction that operating margin will remain around 25 percent - if full-year software and software-related service revenues at constant currency remain flat or decline by 1 percent from their 2008 level of EUR8.62 billion.
While companies tend to hedge their predictions against adverse moves in exchange rates by assuming constant currency, in the first quarter foreign exchange movements acted in SAP's favor.
In the first quarter, software and software-related service revenue remained flat, but excluding Business Objects support revenue that Business Objects would have recognized had it remained a stand-alone entity it fell 2 percent -- and would have fallen 4 percent at constant currency, SAP said.
The company stated its results according to U.S. generally accepted accounting principles (GAAP), but said that from the end of this year, it will only use International Financial Reporting Standards (IFRS) for external communications.
It will also use IFRS figures for internal reporting, forecasting and incentive-based compensation plans for staff, it said. SAP began preparing financial reports according to both GAAP and IFRS in 2007, to comply with German and European law.
The only difference in reported revenue between the two accounting standards concerns SAP's now-closed third-party software maintenance subsidiary, TomorrowNow.
SAP's U.S. GAAP income statement shows TomorrowNow's revenue and income separately because it is a discontinued operation, but IFRS does not allow this separation because TomorrowNow is not a material operation, SAP said.
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