SAP: Slow Software Sales Start, But Current Quarter Looks Good

Overall revenue growth remained in double digits in the quarter ended March 31.

In what the company described as preliminary results for the quarter, SAP said total revenue reached 3.35 billion Euros ($4.39 billion), up 11 percent from 3.02 billion Euros ($3.96 billion) in the first quarter of 2011. Operating profit grew 6 percent to 630 million Euros ($826 million) from 600 million Euros ($785.6 million) in the quarter.

But software sales in the quarter were 640 million Euros ($838.3 million), up just 4 percent from the same period last year. That's down sharply from the 22 percent growth rate for software sales for all of 2011: In last year's first quarter alone, software sales grew a robust 26 percent.

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Software and software-related service revenue grew 13 percent in the first quarter to 2.62 billion Euros ($3.43 billion).

SAP experienced "sales execution issues in North America which impacted first-quarter performance," the company said in its earnings announcement. "These issues have been resolved and the necessary steps have been taken to ensure that North America is back on track. After a record fourth-quarter 2011, some European markets started more slowly in 2012, but are well on track."

SAP did not disclose details about the North America sales problem. It is scheduled to report full results for the first quarter on April 25.

Citing a robust sales pipeline, SAP said it expects software sales growth in the range of 15 percent to 20 percent in the current quarter. The company also said it was standing by its forecasts for the 2012 fiscal year.

"SAP's strategy is sound and the company is executing on its innovation pipeline ahead of schedule," the company said, noting its focus on such technology trends as big data, mobile computing and cloud computing.

The unexpectedly slower sales are reminiscent of Oracle's fiscal second-quarter results announced in December. Oracle executives at the time blamed slower software sales on deals that were delayed because they required additional last-minute approvals.