SAP remains cautious despite bold recovery statements

SAP is positive in outlook but cautious in action

SAP chief executive Leo Apotheker said that the firm's cost cutting programme will remain in place, despite expectations for strong product sales in the near future and positive second quarter financial results.

Yesterday, SAP announced a profit of $423m (£256m), an increase of four per cent on last year's $408m (£247m).

However, much of the net income is the result of significant cost controls. SAP's revenue dropped 10 per cent year on year to $2.58bn (£1.56bn) from $2.86bn (£1.73bn) in 2008.

Apotheker said that the software giant plans to double sales revenues in the "mid-term", although he declined to elaborate on his definition of mid-term, apart from it being shorter than long-term.

SAP software sales declined 40 per cent in the quarter, but Apotheker offered hope to the market by arguing that economic indicators point to an imminent rise in sales. Apotheker pointed to sequential increases in sales in the first quarter, and a pickup in the Asia Pacific region.

"We hope this situation will solidify and spread to the rest of the world," he said.

Apotheker stressed that acquisitions will remain on the company's agenda, and did not rule out another purchase the size of Business Objects, which was a £3.3bn investment.

He also said that SAP's Business ByDesign programme will be accelerated this year, despite being an ongoing problem for the firm.

SAP claims that Business ByDesign is generally available, but recently admitted that it may have to deter some customers from rolling out the suite because it cannot afford to host the underlying architecture.

The company originally said that this difficulty should be resolved by the summer of next year, but Apotheker's comments at the earnings call on Wednesday point to a shorter period of recovery, and show that SAP now has more co nfidence in the product.

However, the firm remains cautious in its cost-cutting initiatives. Apotheker said that, although the hiring freeze announced in October will remain in place, he does not anticipate further cost-cutting programmes unless the economy takes "another major downturn".

Apotheker added that SAP will shift employees between locations if vacancies arise, meaning that the firm might end up reducing its current 48,000 headcount in the long run.