SAP Says It Will Not Meet Sales Expectations

SAP on Monday said it would not meet revenue expectations for the third quarter, citing a drop in orders caused by the global financial crisis.

The business software maker said sales fell toward the end of its fiscal third quarter. Before then, the company believed it was on track to meet its forecasts.

"The market developments of the past several weeks have been dramatic and worrying too many businesses. These concerns triggered a very sudden and unexpected drop in business activity at the end of the quarter," Henning Kagermann, co-chief executive of SAP, said in a statement. "Throughout the third quarter we felt quite positive about our ability to meet our expectations. Unfortunately, SAP was not immune from the economic and financial crisis that has enveloped the markets in the second half of September, causing us to report numbers below our expectations."

SAP now expects worldwide software revenue for the quarter ended Sept. 30 to be between $1.02 billion and $1.04 billion, an increase of 4% to 5% over the same period a year ago. Analysts had expected an increase of 20%, The Wall Street Journal reported.

SAP shares plummeted Monday because of the news. At the end of trading, shares were down by more than 13%, or $5.97, to $39.68.

SAP is not the only major tech company to report weaker-than-expected sales. Dell in mid-September reported "further softening" of demand for its products. It was the second warning in as many months by the computer maker. Rival Hewlett-Packard also has been cautious in its guidance, but the company has been less bearish than Dell.

Information technology sales sometimes escape the impact of economic slowdowns, because companies prefer to keep spending in order to reap the benefits of higher productivity from IT. However, the current global crisis, which stems from the real-estate market collapse in the United States, has caused a severe tightening in the credit market. Without access to sufficient cash, businesses may be forced to reduce spending overall.