SAP's 1998 earnings well below expectations

Citing revenue shortfalls in Japan, SAP AG yesterday said its 1998 earnings would be far below expectations. Pretax profits for 1998 increased by approximately 15% - well short of the German software house's predicted pretax profits of between 30% and 35%. Fourth-quarter profits were pushed down by a revenue shortfall of approximately 200 million marks ($US120.8 million) in Japan, SAP said. SAP is restructuring its activities in Japan in response to the weak earnings there, the company said.

Citing revenue shortfalls in Japan, SAP AG yesterday said its 1998 earnings would be far below expectations.

Pretax profits for the 1998 fiscal year, which ended Dec. 31, increased by approximately 15%, SAP said yesterday in a statement. Last year, the German software house predicted pretax profits of between 30% and 35%, according to Stefan Gruber, an SAP spokesman.

Fourth-quarter profits were pushed down by a revenue shortfall of approximately 200 million marks ($US120.8 million) in Japan, SAP said. SAP is restructuring its activities in Japan in response to the weak earnings there, the company said.

SAP also began using a more conservative method for accounting for its business in Russia, which decreased pretax profits further by 40 million marks, SAP said. The method only accounts for the software revenues when they are received by SAP, according to SAP's Gruber.

Revenues for the 1998 fiscal year were above expectations, however. The company had predicted revenue growth of between 30% and 35%, but achieved growth of close to 40% to total 8.4 billion marks, according to SAP. That takes into account negative currency fluctuations of 4 percent.

Revenue growth was led by the Americas, SAP said, where revenues rose 50%, followed by Europe, where revenues grew 40%.

SAP's board, after considering possible currency fluctuations and the global economy, expects 1999 revenues to increase roughly between 20% and 25%, with pretax profits slightly higher than those for 1998, SAP said.

SAP will announce its final results for the 1998 fiscal year on Jan. 26.

SAP, based in Walldorf, Germany, can be reached at +49-6227-747474 or on the World Wide Web at http://www.sap.com/.

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