SAP SE share price down, Q3 net profit tops estimates, trims yearly outlook

On Monday SAP SE cut down its yearly earnings forecast and reported an increase in Q3 net profit as more customers preferred purchasing products online rather than in conventional packages.

The worlds largest supplier of software business solutions predicted yearly operating profit for 2014 to be in the range of €5.6 billion to €5.8 billion. In July, the company had projected operating profit of between €5.8 billion to €6.0 billion. SAP uses its own accounting method as reference to predictions, which differs from the international financial reporting standards.

The German-based software maker reported third-quarter net profit of €881 million, compared to the same period last years results of €762 million. Analysts polled by Dow Jones Newswires had projected a net profit of €808 million.

Non-IFRS third-quarter operating profit increased by 5% to €1.36 billion, but a little short from estimates of €1.37 billion compiled by Bloomberg. Non-IFRS revenue from software and software-related services edged up 7%, up to €3.6 billion, while non-IFRS total revenue rose 5% to €4.26 billion. Earnings per share rose 8% to €0.84.

Chief Executive Officer Bill McDermott said he is looking to speed up the switch from license-software sales to Internet-based, so-called cloud software, which may cause a decline in 2014 profit. Unlike packaged software, revenue from cloud sales is recognized gradually over three years.

“Due to our aggressive shift to the cloud we expect to have a little less upfront and more subscription revenue,” McDermott said on a conference call with reporters.

“De-accelerating in the cloud would make absolutely no sense,” SAPs Financial Chief Officer Luka Mucic stated on a conference call. “We are hitting the gas pedal as much as we can, we will then see the positive returns in the longer run.”

Last month the software maker agreed to acquire Concur Technologies Inc. The deal is set to $7.4 billion, the biggest purchase for SAP so far. With that addition to its assets, the company is aiming to expand in the cloud technology, as it is under pressure from cheaper rivals, who offer services over the Internet.

SAP SE gained 3.99% on Friday in Frankfurt but fell by 3.85% to €51.93 by 07:22 GMT on Monday, marking a one-year decrease of 2.93%. The company is valued at €66.46 billion based on Fridays close. According to the Financial Times The 32 analysts offering 12-month price targets for SAP SE have a median target of €66.28, with a high estimate of €88.00 and a low estimate of 45.00. The median estimate represents a 22.71% increase from the last price of €54.01.