Investments sap profits for SAP

By PETER GRIFFIN, IT writer

The Asia Pacific head of German software company SAP said New Zealand and Australian operations slipped into the red last year because investment in the two markets was cranked up.

SAP generated revenue of around €8 million ($16 million) in New Zealand during 2001 last year selling enterprise software and consulting services according to its annual report, but posted a loss of €858,000 ($1.73 million).

That comes in well below the projections of SAP's Australia and New Zealand chief executive, Chris Bennet, who last November was reported in the Herald as saying he expected revenue for 2001 to be somewhere in the region of $25-50 million.

Along with Australia, which lost €583,000 on revenue of €112 million, SAP operations in Korea, the Philippines and a couple of Singapore-based divisions ended last year in the red.

But SAP's president and chief executive for Asia Pacific, Les Hayman, said that while a higher level of investment hit the bottom line for Australia and New Zealand, both 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. The next year you might have to hire 20 graduates. We don't suddenly knee-jerk and start closing down operations [if they show a loss]," he said.

While on paper several units showed losses, 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 generate the bulk of profit for the region.

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

"It goes into people, products, clients and localised development."

SAP had made good progress in the quarter ending March 31, but Gurrey would not give any indication of revenue growth. She said SAP's per cent market share in New Zealand was in the "upper 40s".

SAP had won some 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, SAP reported a heavily reduced first quarter profit of €65 million for its global operations, down from €109 million a year ago. Eating into profit were losses associated with the company's 20 per cent investment in Commerce One and costs related to last year's acquisition of US company Top Tier.

Revenue for the quarter was within expectations, with company posting 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.

"The US did have some currency advantage. But the major thing with Europe is the large size of the customer base. We're still focused on new business rather than having a huge customer base that you can live on in terms of upgrades and extensions."

Revenue in Europe, Middle East, and Africa climbed 11 per cent to €886 million, while revenue in the Americas rose 7 per cent to €587 million.