Higher NZ spending sends SAP into red

By PETER GRIFFIN

New Zealand and Australian operations slipped into the red at German software company SAP last year.

But the company blames the fall on its increasing investment in the two markets.

SAP generated revenue of around €8 million ($16.3 million) in New Zealand selling enterprise software and consulting services, but posted a loss of €858,000, says its annual report.

That is well below the projections of SAP's Australia and New Zealand chief executive, Chris Bennet, who said last November that he expected revenue to be between $25 million and $50 million.

In Australia, SAP lost €583,000 on revenue of €112 million.

Its operations in Korea, the Philippines and a couple of Singapore-based divisions also ended the year in the red.

But SAP's president and chief executive for Asia Pacific, Les Hayman, said the Australia and New Zealand divisions were likely to turn a profit this year.

"One year you're going to decide to invest in facilities, the other year you don't," he said.

The Asia Pacific region still contributed net profit of more than €43 million and sales revenue approaching €900 million to SAP's accounts. Japan and Hong Kong operations generated most of that.

SAP New Zealand manager Viv Gurrey said increased investment over the past 18 months had been spread across the company.

The company made good progress in the quarter ended March 31. SAP's per cent market share in New Zealand was in the "upper 40s". It had won sizeable contracts in the early part of the year. The most significant was a supply chain management deal with Fonterra, said to be worth up to $15 million for SAP.

This month it reported a first-quarter profit of €65 million for its global operations, down from €109 million a year ago. It was hit by losses associated with the company's 20 per cent investment in Commerce One and costs related to the acquisition of US company Top Tier.

Revenue for the quarter was within expectations, with total revenue of €1.66 billion, compared with €1.52 billion last year.

Hayman defended Asia Pacific's relatively low growth rate of 4 per cent for the quarter, saying the region did not have the mature customer bases of the US and Europe to rely on for continuing business.