SAP to Buyback Shares as 3Q Profit Doubles

SAP AG (NYSE:SAP), the world’s largest business software maker, announced on Wednesday a 23 percent boost in profit in the third fiscal quarter.

SAP also announced that it is planning to buy back shares form the market because of “sound financials”. The jump in operating profit was aided by a strong demand and the company has also retained its 2011 earnings outlook.

The business software company said in a statement that profit following the end of third fiscal quarter increased to $1.74 billion from $553 million a year ago. Revenues jumped 14 percent to $3.93 billion. Given SAP’s third quarter free cash flow generation this year, the company further plans on buying back its shares in the next two months.

SAP had already announced its preliminary third quarter results on October 14, the group’s underlying operating profit increased by 23 percent compared to previous year to $1.52 billion, exceeding the average forecast made by analysts of $1.49 billion.

SAP, with Oracle as a rival, said that the third quarter sales as software related business and key software business rose 16 percent to $3.18 billion, while group sales made it to $3.90 billion. Jim Hagemann Snabe, co-CEO of SAP said that the company’s strong performance and gains in market show clearly that SAP’s customer focused innovation strategy prosperous.

SAP reiterated its 2011 outlook and still expects software linked services and software revenues to increase between 10 percent to 14 percent. The operating profit would reach the upper ends between $4.94 billion and $5.14 billion, facilitated by strong demands.

SAP, based in southwestern Germany issues direction on a non IFRS basis, which includes some revenue that excludes some costs and is not recognized under IFRS, adjusting its forecast for swings in currency.  The non IFRS profit figures also do not include the gain resulting from the latest provision cuts.

Recently, Oracle Corp launched two computing systems aiming to steal market share from SAP AG and International Business Machines Corp. Larry Ellison, CEO of Oracle, who unveiled the computer systems said that are they are designed for organizing information from the web, called the Exalytics Intelligence Machine and offer the option to access data much faster.

After SAP, Oracle is the second largest maker of database software and business applications. It is seeking to reserve its database for computing jobs that involve large amounts of information. Oracle is the biggest threat for SAP in the business software application market currently. SAP has so far retained its old customers , but the next quarter will be a testing time for the company.

Post Written By: Ed Liston Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications. He is widely quoted in various financial publications on the Internet. When Ed is not writing about stocks, investing in stocks, talking about stocks, or otherwise doing something stock related, he likes to go sailing and fishing in his yacht.