Europe’s largest software company, SAP warned late on Friday that first-quarter results would be weaker than expected due to slower sales of software licenses to corporate customers, particularly in Brazil and the United States.
Software license revenues fell 13 percent while the company’s newer, but lower-margin cloud software business grew 33 percent. Business customers are shifting to cloud-based software delivered over the Internet instead of relying on older software packages they install and run on in-house computers.
Chief Executive Bill McDermott said that America was a “little more lumpy in terms of the signing of contracts” and there is nothing worse than a lumpy super-power.
First-quarter operating profit, excluding special items, rose five percent to $1.25 billion. Analysts, on average, had been looking for a first-quarter operating profit, excluding special items, of £1.33 billion.
The company also reported revenue of $5.4 billion which was also a bit lower than expected.
SAP, whose customers include many of the world’s biggest multinational corporations, specializes in business applications ranging from accounting to human resources to supply-chain management.
McDermott said he has “perfect, clear confidence” that SAP can meet the full-year profit targets it had set out in January. He said some software licensing deals the company had expected to close last quarter spilled into the current second quarter.
Ongoing political and macroeconomic instability in Latin America, particularly in Brazil, hurt first-quarter results. North America, coming off a very strong fourth quarter, had a slower start to the year, SAP said in a statement.