In a bid to stay a step ahead of the game, German ERP vendor SAP AG has been beefing up its consulting business while Baan, PeopleSoft and Oracle are still playing catch-up on technology. As a direct result, SAP’s margins have tumbled to around 25% over the period. Morgan Stanley & Co figures it costs $170,000 to train and equip each consultant and takes six months before this can hit the bottom line. Nevertheless SAP expects that first-half profits before tax up will be up 40% at $446.18m compared with the same period last year, on revenues up 57% at $2.05bn. A weak Japanese market meant license revenue from Asia pacific was off by some $180m. Provisions made for its employee incentive plan knocked six points of its profit growth but it maintains its forecast of a 30%-35% increase in pre-tax profits for the entire year. The market received the information poorly, noting profitability has not risen as fast as growth and appeared to use the report as a pretext for profit-taking. SAP stock lost 10% of its value at one point during Friday trading on the Frankfurt exchange, closing down 4.49%. Full results along with some big new customer wins are supposed to be announced July 20th. See Financial News.
