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Explore the Ultrium Edge

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SAP cuts investment in Business ByDesign as net income falls

By Peter Sayer , IDG News Service , 04/30/2008
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SAP is putting the brakes on the roll-out of Business ByDesign, its offering for small businesses, it said Wednesday, as it reported first quarter net income down 22 percent compared to a year earlier, on revenue up 14 percent. The quarter is the first to incorporate the results of Business Objects, which SAP acquired Jan. 21.

The company said it is cutting investment in Business ByDesign, and will miss its target of US$1 billion in revenue and 10,000 customers for the product by 2010. It will now take a year to 18 months longer to reach that level, as it works with customers and partners to fine-tune the product, it said.

SAP reported signing up more than 1,570 small and medium-size business (SMB) as new customers in the first quarter, excluding those brought by Business Objects, but few of those are using ByDesign. SAP expects to engage with fewer than 1,000 Business ByDesign customers in total this year, it said, and will concentrate its sales efforts on just six countries where the most productive early customers are based.

It will delay rolling Business ByDesign out to other countries until next year, and as a result will invest around €100 million ($158 million) less in the product this year than it previously planned, cutting investment to between €75 million and €125 million.

That will help boost SAP's operating margin, which dropped to 14.6 percent for the first quarter, down from 20.2 percent a year earlier.

The company reported net income of €242 million for the quarter, on revenue of €2.46 billion, compared to net income of €310 million on revenue of €2.16 billion a year earlier.

Analysts had expected revenue to rise around 40 percent to $3.96 billion (€2.51 billion), according to a consensus poll of 13 analysts by Thomson Financial Network.

The results incorporate those of Business Objects from Jan. 21, excluding some ongoing support revenue that U.S. Generally Accepted Accounting Principles (GAAP) prevent SAP from recognizing. The results are preliminary, and depend on the as-yet undecided final purchase price allocation SAP must make for its acquisition of Business Objects.

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