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SAP posts weak earnings and delays product launch

German software giant SAP said Wednesday that first quarter net profit fell 22 percent and disappointed investors as it delayed the launch of a new product for small- and medium-sized enterprises.

SAP posts weak earnings and delays product launch
Photo: DPA

SAP said profit fell to €242 million ($377 million) owing to increased spending on the launch of its Business ByDesign software and charges related to a recent major acquisition. Analysts had expected net profit of €298 million euros.

Shares in the professional software giant plunged in early Frankfurt trading, shedding 4.36 percent to 31.61 euros, while the Dax index of leading shares was flat overall.

“The figures across the board were below expectations; net profit looks especially weak,” said a local trader in his first reaction.

Another said bluntly: “This was a very bad report.”

SAP’s operating margin, a key gauge of profitability, narrowed to 14.6 percent from 20 percent in the year-earlier period, hit by about €40 million of additional costs to attract customers to the new software.

Software revenues, another important indicator for the sector, increased however by 11 percent to €622 million. SAP also said it was changing launch plans for Business ByDesign software and now expected to reach its target of €1 billion in revenue from it between 12 and 18 months later than the original 2010 target.

Press reports have said SAP is having problems with the product, which was billed as a pillar of future growth. This year, SAP will launch the software in only six countries, with other roll-outs expected in 2009.

“Since September, the group is working closely with clients and partners to validate and adjust solutions,” SAP said.

It expected “significantly” fewer than 1,000 customers to buy the product this year and did not foresee reaching its target of 10,000 customers earlier than 2011, a year later than planned.

Meanwhile, total revenue in the first quarter rose to €2.46 billion from €2.16 billion a year earlier, the group said. Operating profit came in at €359 million, down from €436 million, as SAP continued to integrate the French company Business Objects, which it bought last year for €4.8 billion.

SAP raised its 2008 forecast for operating margin to 28.5 to 29 percent as it cuts spending on Business ByDesign by about €100 million this year.

AMAZON

Germany opens ‘anti-competition’ probe into Amazon with tougher law

Germany's competition authority said Tuesday it had opened an inquiry into online retail giant Amazon over potential "anti-competitive practices", using a new law giving regulators more power to rein in big tech companies.

Germany opens 'anti-competition' probe into Amazon with tougher law
An Amazon warehouse in Brandenburg. Photo: picture alliance/dpa/dpa-Zentralbild | Patrick Pleul

Federal Cartel Office head Andreas Mundt said his office is examining whether Amazon has “an almost unchallengeable position of economic power” and whether it “operates across various markets”.

If so, it would be deemed of “paramount significance”, said Mundt, adding that the regulator could “take early action against and prohibit possible anti-competitive practices by Amazon”.

“This could apply to Amazon with its online marketplaces and many other, above all digital offers,” he added.

Under the amendment to Germany’s competition law passed in January, the watchdog said it now has more power to “intervene earlier and more effectively” against big tech companies, rather than simply punishing them for abuses of their dominant market position.

READ ALSO: ‘I want to know origin of my grapes’: Amazon loses fruit and veg ruling in German court

The German reform coincided with new EU draft legislation unveiled in December aimed at curbing the power of the internet behemoths that could shake up the way Silicon Valley can operate in the 27-nation bloc.

The push to tighten legislation comes as big tech companies are facing increasing scrutiny around the globe, including in the United States, where Google and Facebook are facing antitrust suits.

The Amazon probe is only the second time that Germany’s Federal Cartel Office has made use of its new powers, after first employing them to widen the scope of an investigation into Facebook over its integration of virtual reality headsets.

The watchdog already has two traditional abuse control proceedings open against Amazon.

One involves the company’s use of algorithms to influence the pricing of third-party sellers on Amazon Marketplace, while another is probing the extent to which Amazon and major producers such as Apple exclude third parties from
selling brand products.

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