Chordiant, SAP Issue Warnings

The CRM industry and the overall technology market took a financial blow yesterday from financial warnings from two European born CRM vendors SAP AG and rising vendor Chordiant Software Inc. SAP warned sales growth is slower than expected, causing the German software giant to miss its 2002 sales forecast for 15 percent growth. Instead, SAP expects 2002 revenues to grow between 5 percent and 10 percent over 2001 revenues. The company expects to officially release its second quarter results next week. SAP said revenue in the second quarter declined by 4 percent to $1.78 billion and software license revenues declined by 23 percent to about $491 million. Operating income for the period, excluding stock-based compensation and acquisition related charges, was down by about 23 percent to about $323 million. SAP also said it expects to take charges to reflect losses in the market on its investments, including an anticipated $315 million charge for a 20 percent investment in Commerce One. As a result, SAP said it will post a loss in the second quarter $233 million. While SAP's overall revenue dipped, AMR Research expects SAP's CRM related revenue to grow, mostly due to its latest developments with mySAP CRM. The software company grew its CRM-related revenue 138 percent last year to $533 million and is expected to nearly double that to $998 million in 2002, AMR Research analysts say. But not every vendor's CRM business is growing. For one, Chordiant said after yesterday's market close that for its second quarter ended June 30, it expects to report revenues of approximately $15 compared to $18.5 million reported for the same period of 2001. The company had previously expected revenue of between $22 millionto $23 million. Chordiant's second quarter 2002 pro forma loss, which excludes in-process research and development, stock-based compensation, one-time restructuring costs and amortization of acquired intangible assets, is expected to be 13 cents per share, compared to a pro forma loss of 14 cents per share reported for the second quarter of 2001. This loss of 13 cents per share for the second quarter is far below analyst consensus estimates of a loss of four cents, according to Thomson Financial/First Call. The setback marks a reversal of fortune for Chordiant and ends its nine-quarter streak of meeting or beating analyst expectations. "We won a load of deals in the second quarter, but it is taking longer to close than we anticipated. Some new customers will roll into the third quarter," says Stephen Kelly, chief executive of Chordiant. On the bright side, however, Chordiant has cash in the bank. Chordiant's cash, cash equivalents and short-term investments at the end of the second quarter are expected to be approximately $44 million, which reflects net cash usage of approximately $5 million for the acquisition of OnDemand in April and proceeds of $3 million from the sale of common stock. The company is slowly pushing into the US market, which currently represents 25 percent of overall revenue. To help that number reach 50 percent by the end of 2003, Kelly says he expects to sign on some large brand name customers in the U.S. within the next six months.