SAP AG Beats Zacks Consensus

• By Zacks Equity Research
• On 3:56 pm EST, Tuesday November 3, 2009

SAP AG (NYSE: SAP - News) reported third quarter of 2009 net income from continuing operations of 60 cents per share, compared to the Zacks Consensus Estimate of 58 cents.

U.S. GAAP software and software-related service revenues were €1.94 billion (previous year: €1.99 billion), a decrease of 3%. U.S. GAAP total revenues were €2.51 billion (€2.76 billion), a decrease of 9%. U.S. GAAP software revenues were €525 million (€763 million), a decrease of 31% (30% at constant currencies).

In the third quarter of 2009, SAP closed major contracts in several key regions including Dagrofa/SuperGros, Prada S.p.A., SeverStal OAO, Surgutneftegaz OAO, Swiss Life AG, and Telefonica, S.A. (NYSE: TEF - News) in EMEA; Banco Industrial S.A., ConocoPhillips (NYSE: COP - News), Dolby Laboratories (NYSE: DLB - News), Fairfax County, Research In Motion Limited (NasdaqGS: RIMM - News) and Valero Services Inc. in Americas; and APL Co. Pte. Ltd, Department of Foreign Affairs and Trade, Australia, HDFC Standard Life Insurance Co Ltd, Philippine Long Distance Telephone (NYSE: PHI - News), Samchully Co., Ltd. and Taiwan Power Company in the Asia-Pacific Japan region.

U.S. GAAP operating income was €606 million (2008: €614 million), a decrease of 1%. U.S. GAAP operating income was negatively impacted by restructuring charges of €21 million resulting from the previously announced reduction of positions. The third quarter 2009 operating income was also affected by non-recurring items, particularly litigation expenses and profit resulting from reversals of provisions recorded in the accounting for the acquisition of Business Objects. The net effect of these non-recurring items was an increase of operating income by €2 million.

Operating cash flow from continuing operations for the nine month period ended Sep 30, 2009,  was €2.38 billion (2008: €1.97 billion), an increase of 21%. Free cash flow was €2.21 billion (2008: €1.73 billion), an increase of 28%. Free cash flow was 29% of total revenues (2008: 21%). At Sept. 30, 2009, SAP had a total group liquidity of €3.04 billion (Dec. 31, 2008: €1.66 billion), which includes cash and cash equivalents, restricted cash and short term investments. At Sep 30, 2009, net liquidity, defined as total group liquidity less bank liabilities, was €925 million.

SAP AG, together with its subsidiaries, develops, markets, and sells enterprise application software products for corporations, government agencies and educational institutions in Europe, the Middle East, Africa, North America and Latin America, and the Asia-Pacific Japan region. Major competitors are Microsoft Corporation (NasdaqGS: MSFT - News), International Business Machines Corporation (NYSE: IBM - News) and Oracle Corporation (NasdaqGS: ORCL - News).

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