SAP says profit down 2 pct. in '08, axes 3,000 jobs

[January 28, 2009]  FRANKFURT, Germany (AP) -- Software maker SAP AG said Wednesday it would cut 3,000 jobs worldwide to cut costs as its 2008 net profit fell 2 percent, weighed by a difficult year-end when the financial crisis deepened.

The Walldorf-based company, the world's largest producer of business-software applications, said net profit fell to euro1.89 billion ($2.49 billion) from euro1.92 billion a year ago. Total revenues increased 13 percent for the year to euro11.6 billion from euro10.2 billion in 2007.

The company said it would cut 3,000 jobs worldwide, which will result in yearly savings of between euro300 to euro350 million starting in 2010. The company would also continue its cost savings programs.

The company employs about 51,500 people at locations in more than 50 countries. It did not specify where the cuts would come.

SAP said it would not provide an outlook for the current year because of the uncertainty surrounding the economic and business environment.

"2008 can be described as a year having two completely opposite halves, where a strong first-half performance was greatly disrupted late in the third quarter by the beginning of the worst economic and financial crisis the world has witnessed in decades," Henning Kagermann, the chief executive of SAP, said in a statement.

"Nevertheless, in total we had a good year amid a very tough economic climate, posting full-year double-digit growth in software and software-related service revenues."

SAP said those revenues grew 14 percent to euro8.5 billion from euro7.4 billion in 2007.

Operating income increased 4 percent to euro2.8 billion in 2008 from euro2.7 billion in 2007, while operating cash flow rose 10 percent to euro2.2 billion from euro2 billion. Free cash flow increased 13 percent to euro1.8 billion from euro1.6 billion.

SAP said it had group liquidity of euro1.7 billion at the end of December, which included cash, cash equivalents and other investments. That is about 40 percent less group liquidity than the euro2.8 billion the company had at the end of 2007.

The report sent shares of SAP 6.2 percent higher to euro27.84 in Frankfurt morning trading.

UniCredit Analyst Knut Woller said the planned head count reduction of around 7 percent to about 48,500 employees in 2009 from 51,536 in 2008 should positively affect the company's margins after restructuring charges.

He said he was maintaining his "buy" rating on the stock and a target price of euro33.

"SAP expects that market conditions will remain difficult in 2009 and does not provide any specific revenue guidance for the full year," he said in a research note. "On the other hand, the company announced restructuring measures."

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[Associated Press; By GEORGE FREY]

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