SAP AG (SAP) reported first quarter2011 earnings per share from continuing operations of €0.34 (46 cents) which were below the Zacks Consensus Estimate of 65 cents. Total revenues were €3.02 billion ($4.12 billion) below the Zacks Consensus Estimate of $4.17 billion.
Software revenue was €583 million, an increase of 26% year over year.
Software and software-related service revenue was €2.33 billion, an increase of 20%.
Operating profit was €597 million, an increase of 7%. Operating margin was 19.7%, a decline of 2.5% year over year.
Profit after tax was €403 million, an increase of 4% year over year.
Operating cash flow for the first quarter 2011 was €1.59 billion, which is the highest operating cash flow for a first quarter in the company’s history. Free cash flow was €1.45 billion, an increase of 103% year over year. Free cash flow was 48% of total revenues in the quarter.
The company anticipates 2011 software and software-related service revenue to increase in a range of 10% – 14%. The company expects full-year 2011 operating profit to be in a range of €4.45 billion – € 4.65 billion.
SAP is the leader in the worldwide enterprise applications market with the largest market share. Its primary focus is on high-margin software license sales, since this category benefits the most from the improving information technology (IT) spending environment. The company is poised to benefit as the market environment is improving.
The company remains best positioned in the European software space, given its top-tier positioning, strong service-oriented architecture (SOA) adoption trends and its diversified industry and geographic footprint. The company is entering the on-demand market, with SAP Business ByDesign being the most important innovation.
SAP Business ByDesign is a next generation, on-demand technology platform, which the company is confident of rolling out in 2011. The company is also innovating products in the area of mobility which would provide SAP solutions that can be accessed from all leading mobile platforms, like RIM, Nokia, Apple, Google Android, etc.
Headquartered in Walldorf, Germany, SAP AG is one of the largest independent software vendors in the world and the leading provider of enterprise resource planning (ERP) software. Its solutions are designed to cater to the needs of organizations, ranging from small and medium businesses to large, global enterprises.
SAP’s business suite solutions help clients improve customer relationships, enhance collaboration and improve efficiencies across their supply chains and business operations. International Business Machines Corp (IBM) and Microsoft Corporation (MSFT) are major competitors.
We currently have a Neutral recommendation on SAP AG.
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