Job cuts help SAP make up for slowing sales

By SiliconIndia   |   Thursday, 30 July 2009, 03:04 Hrs   |    21 Comments
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Job cuts help SAP make up for slowing sales
Bangalore: SAP AG, a business software giant has raised its full year forecast for profitability since it has been able to make up for its slowing sales through job cuts. SAP has eliminated around 2,800 of the 3000 jobs it plans to cut this year to make up for falling revenue.

SAP said that costs linked to the measures, the first since it was founded in 1972, will be 200 million euros ($283 million), at the low end of its previous prediction, reports Bloomberg. SAP has made 500 million euros in cost savings and aims for 600 million euros to 700 million euros a year, said Leo Apotheker, CEO.

"They've done a good job by getting ahead of their original forecast" for job cuts, said Bernd Laux, a Frankfurt- based analyst at Cheuvreux in Frankfurt who has an "underperform" rating on the stock and a price target of 33 euros. "They need a return to sales growth."

Total second-quarter sales fell 10 percent to 2.58 billion euros from 2.86 billion euros a year earlier, SAP said. Net income rose to 423 million euros in the quarter from 408 million euros a year earlier. Its operating margin for the second quarter came in at 27.7 percent versus the 24.4 percent predicted by analysts, compensating for a 40 percent slide in software sales.

Apotheker said that in the medium term, SAP wants to double its product revenue. He also added that he may spend as much as five billion euros on takeovers to win market share from competitors. "If there are opportunities, we won't hesitate and we will move ahead," Apotheker said. "It could be large or small."

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