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SAP won't give outlook but continues jobs cuts

Software sales down by a third in Q1

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SAP balked at providing a financial outlook today and confirmed ongoing job losses, as it unveiled first quarter financials that showed a massive slide in software revenue for the ERP giant.

The figures coincided with an agreement between the firm and user groups that will put a cap on price rises for maintaining its enterprise products from next year.

SAP turned in revenues of €2.4bn for the quarter ending March 31, down 3 per cent on the year. However, its revenues from software were down 33 per cent to €418m, while software and software-related service revenues were static at €1.7bn.

The company absorbed a restructuring charge of €160m, which helped knock net income down 16 per cent on the year to €204m.

The firm said the operating environment would remain "challenging" throughout this year. In January, it said it would adapt to the market and recession by cutting its workforce to 48,500 this year, leading to a restructuring charge of €200m to €300m. Given it cut 2,200 jobs in Q1, at a cost of €160m, SAP clearly has some more ax swinging still to do.

While it was happy to flag up job cuts and restructuring charges, it balked at giving financial forecasts for its software and software-related service revenues.

This could in part be down to the agreement it has struck with the SAP User Group Executive Network (SUGEN) on a "defined list of key performance indicators that will be used to measure the success of SAP® Enterprise Support services."

As part of this, SAP said it has modified the 2008 pricing program for SAP Enterprise Support as it applies to support contracts migrated there. This decision coincides with its recently announced seven-year maintenance lifecycle. The enterprise support program - which combines a number of previous support programs - has gone down like a ton of bricks since the firm first unveiled it, just ahead of the economic downturn.

In practice, this means the program will now run to 2015, three years longer than SAP first planned.The company said that from next year, price increases will be subject to a yearly fixed upper cap.

"This translates to an increase average of no more than 3.1 percent per year from 2010 onwards. The price of SAP Enterprise Support will be capped at 22 percent through 2015." ®

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