SAP Q3 profits soar on reduction of TomorrowNow provision

The company saw revenue grow by 14 percent in the quarter

SAP reported Wednesday a 14 percent increase in revenue in the third quarter ended Sept. 30, and said its business pipeline continues to remain very strong and companies continue to invest in IT. The business software vendor did not however revise its outlook for the full year 2011, citing the ongoing uncertain macroeconomic environment.

Total revenue in accordance with International Financial Reporting Standards (IFRS) was €3.41 billion (US$4.6 billion at the exchange rate on the last day of the quarter), while software revenue at €841 million grew by 28 percent from the same quarter last year. IFRS software and software-related service revenue was €2.69 billion, an increase of 16 percent.

SAP's third quarter software revenue grew at its fastest rate in a decade because customers are shifting their investments to software that helps them grow and innovate, the company said in a statement.

SAP's profits soared by 150 percent, in accordance with IFRS, after the company reviewed its provision for settlement of the TomorrowNow litigation with Oracle by €723 million, and reflected that sum in the operating profit. U.S. federal judge Phyllis Hamilton reduced the damages in September from $1.3 billion, while giving Oracle the choice of accepting $272 million or seeking a new trial.

The company forecasts full-year 2011 non-IFRS software and software-related service revenue to increase in a range of 10 percent to 14 percent at constant currencies, but expects to reach the high end of the range.

SAP plans to evaluate buying back shares in view of its strong free cash flow generation over the first nine months of 2011. During this period, the company has already bought back 3.6 million shares at an average price of €43.84, mainly in connection with SAP's share-based compensation plans, SAP said.

John Ribeiro covers outsourcing and general technology breaking news from India for The IDG News Service. Follow John on Twitter at @Johnribeiro. John's e-mail address is john_ribeiro@idg.com

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