Growth Strategies

European software maker SAP has reported better-than-expected earnings that were helped in part by a 19 percent year-over-year increase in CRM revenue.

The German company's third-quarter net income was $198.4 million, or about 63 cents per share, which beat many analysts' expectations of about $145 million. For the same quarter last year SAP's net income was about $36 million. The company's sales came in at about $1.65 billion, relatively flat compare to $1.6 billion for the same quarter a year ago.

For the third quarter, ended September 30, 2002, software revenue related to mySAP CRM reached approximately $90.5 million, up 19 percent from $76 million for the corresponding quarter last year. That figure represents 21 percent of total license sales.

John Grozier, group director of product marketing for mySAP, says the company is very pleased with the performance for the quarter. He attributes the good numbers for mySAP to customers that are looking for an integrated CRM solution that connects to ERP and back-end systems.

"People are buying into the vision of connected CRM," Grozier says. "They have larger initiatives to bring in business processes--not just technology. Integration is not just about plumbing. It's just not enough to announce an integration infrastructure. Our performance is validation of the message we have been preaching for a year and a half."

A new version of mySAP was released during the quarter, and Grozier expects it will have a significant impact on revenue for the next quarter.

Third-quarter CRM sales were up 19 percent compared to the same period a year ago, but they were below the second quarter of 2002's level of $101 million.

Grozier attributed this to the fact that revenue coming from Europe, the Middle East, and Africa account for much of SAP sales, and during this quarter many of those countries are on holiday, making the third quarter one of SAP's historically weaker periods. Still, SAP reported that overall revenue for the EMEA region was up 9 percent over the corresponding quarter a year ago.

During the quarter SAP also announced Bill McDermott as its new president and CEO of the Americas, and added some new CRM customers, including Ford Motor Co., Caterpillar Corp., and Adobe Systems Inc. in the United States.

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