SAP ADRs were hammered by as much as 10% yesterday after the company missed its 2006 software-license sales targets, a critical benchmark, because of slowdowns in the U.S. and Asian markets. This is the second time in four quarters that the company has missed Street forecasts. Revenue was hurt in part by the strong euro, which slashed the value of sales generated in the U.S. Software sales are a critical revenue source for companies like SAP and Oracle because they generate subsequent revenue from maintenance and consulting. Last January, SAP forecast sales growth of 15-17%, but in October, it called that range unlikely. Full-year software-license revenue came in at 13.5%. Q4 license sales in the Americas were flat, widely missing the Street's 20% growth forecast. Revenue in Asia grew 2% versus a 17% analyst estimate. Oracle, which reported last month, also missed estimates, posting a 1% Q2 gain in revenue from software applications. SAP did not comment on these misses in its report, but plans to hold a press conference on Jan. 24 to give details of its Q4 earnings.
• Sources: Bloomberg, Business Week, Wall Street Journal
• Related commentary: Deciphering SAP's Poor Report, SAP Warns, Sending Shockwaves Through Enterprise Software, Goldman On IT Trends: What Tech Companies Stand To Gain?
• Potentially impacted stocks and ETFs: SAP AG (SAP). Competitors: Oracle Corp. (ORCL), Microsoft Corp. (MSFT), International Business Machines (IBM). ETFs: Software HOLDRs (SWH), iShares MSCI Germany Index (EWG)