SAP SI shines as SAP moves to acquire

Germany’s SAP Systems Integration AG (SAP SI) posted a 78 percent increase in net profit for 2003, just one week after business applications vendor SAP AG announced plans to acquire the remaining shares of the IT service provider.

SAP SI’s net profit in 2003 soared to €26.4 million ($32.5 million on Dec. 31, the last day of the period being reported) from €14.8 million the year before, on revenue that dipped 4 percent to €280.3 million from €293.2 million, according to the company’s annual report released Wednesday, confirming preliminary figures published at the end of January.

One factor contributing to the profit rise was the company’s move to increase the number of days it bills customers for service. “Last year, we were able to bill clients for 85 percent of all workable days in Germany, amounting to 220, from around 70 percent the year before,” said SAP SI investor relations spokesman Stephan Kahlhöfer.

The spokesman attributed the slight drop in revenue to tough market conditions. SAP SI saw revenue dip in Germany, which accounts for 85 percent of its business, by 2.6 percent, he said.

For 2004, the systems integrator expects revenue to climb between 8 percent and 12 percent, according to Kahlhöfer. A huge chunk of that growth — between 7 percent and 8 percent — will come from revenue to be consolidated for the first time from two companies acquired last year: Germany’s SPM Technologies Deutschland GmbH and Switzerland’s SLI Consulting AG, he said.

The positive financial results come as SAP, which owns around 70 percent of the Dresden, Germany, company, prepares to buy the remaining shares.

On March 24, SAP in Walldorf, Germany, announced its intention to take over the systems integrator completely and merge the company with its own consulting unit.

SAP’s new NetWeaver integration platform is driving the acquisition, according to Kahlhöfer. “SAP SI focuses on systems integration, while SAP’s consulting unit has traditionally focused on implementation,” he said. “But with NetWeaver, SAP is moving more into systems integration, creating a competitive situation. So it makes sense to bring the units together and offer one face to the customer.”

SAP is currently working on a formal tender to acquire outstanding shares, to be published in about a month, after which shareholders will have four weeks to decide on the offer, Kahlhöfer said.

SAP SI, which was initially formed from the merger of three IT service providers, was floated on the Frankfurt Stock Exchange in September 2000.