Software AG maintains annual growth projection despite weaker Q2

Thursday, July 14, 2011

German applications developer Software AG (Frankfurt: SOW) recorded total revenues of 256mn-258mn euros (US$363mn-366mn) in the second quarter of 2011 based on preliminary figures, a roughly 3.5% drop from 267mn euros in the same period in 2010 but flat at constant currency, the company said in a statement.

Nonetheless, based on expected licensing deals and consulting projects for the second half of fiscal 2011, the company affirmed the forecast for the full year that was published in January, predicting revenue growth of 5-7%, at constant currency, and a jump in net income of 10-15%.

Unfavorable exchange rates had a significant impact on revenues compared to the corresponding period in 2010. The strengthening of the euro reduced stated revenues by roughly 10mn euros from 2Q10. Earnings were less affected because a large share of costs is paid in local currency.

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On the downside, software license sales maintained the lackluster performance in Europe registered in 1Q11, and some license agreements expected by the end of the second quarter did not close. In the meantime, demand for implementation of SAP products remained below that of the previous year. For the second quarter of fiscal 2011, the company expects product revenue of 151mn-152mn euros (compared to 162mn euros in 2Q10), of which license revenue will account for 57mn-58mn euros.

But on the upside, project services, including IT integration and process optimization, posted double-digit growth in the second quarter of the year. Services are expected to bill 105mn-106mn euros in the period from 105mn euros in the same comparison.

Software AG will publish full figures for Q2 on July 28.