SAP expects squeezed sales due to Covid-19

The German company's shares crashed in November, falling 21%, after it cut its revenue forecast for the full year

The logo of SAP software company on the roof of a building in Moscow. Reuters

The corporate software maker SAP’s attempt to accelerate moving customers to cloud-based software began to see signs of success, although the company warned sales will continue to be impacted by the effects of the coronavirus pandemic.

The company said 2021 cloud and software revenue, excluding some items, will be as much as $28.9 billion in constant currency. When currency is adjusted, revenue may fall as much as 4 per cent from a year earlier, Walldorf-based company said in a statement.

“This outlook assumes the Covid-19 crisis will begin to recede as vaccine programmes roll out globally, leading to a gradually improving demand environment in the second half of 2021,” the company said.

SAP has spent years attempting to move away from legacy software that resides in clients’ computer servers, to cloud-based software, which is delivered over the internet.

Chief executive Christian Klein is trying to develop such software, after his predecessors relied on acquisitions to do so. SAP has seen uneven results in this modernisation effort and the company has twice in the past year warned that the pandemic would stymie client deals.

Most notably, SAP’s shares crashed in November, falling 21 per cent, the biggest intra-day fall since 1999, after it cut its revenue forecast for the full year and warned the pandemic would hurt demand. Mr Klein said at that time that the pandemic will delay SAP’s goals for revenue by one or two years.

The latest results show a slight improvement in new licence sales, but it is too early to call a turnaround, according to Bloomberg Intelligence analyst Anurag Rana. Cloud sales in North America and Europe beat SAP’s expectations, as well as software licences.

SAP, which was set to report earnings later this month, said fourth-quarter revenue declined 6 per cent $9.2bn.