SAP Misses Third-Quarter Earnings Expectations as Margins Fall

SAP's (SAP) shares fell Wedneday after it reported its third-quarter profit rose less than analysts had expected.

The German software company grew its sales 20% from the year-ago quarter to approximately $4.14 billion. But its operating margin declined to 24% from approximately 25% in the same period a year ago, which caused its profit to rise slower than sales. SAP's net income increased 12% to about $691 million, or 58 cents a share, from about $616 million, or 52 cents a share, a year earlier.

Analysts had expected earnings of 67 cents per share on sales of $3.95 billion, according to a Thomson Reuters survey. The company's stock fell 5.2% to close at $51.27 per share Wednesday.

SAP, which competes against Oracle in selling software for tasks such as payroll tracking, also is embroiled in a legal dispute with its U.S. competitor. Oracle CEO Larry Ellison this week accused Leo Apotheker, former SAP chief executive and incoming head of Hewlett-Packard, of orchestrating a plan to steal ideas from Oracle while at SAP.

Oracle is seeking about $2 billion in damages, while SAP, which has admitted to wrongdoing -- but says the problem was confined to its now-defunct subsidiary, TomorrowNow -- has said it may owe tens of millions of dollars, Reuters reported Wednesday.

The tension between the competitors is only likely to grow. On SAP's earnings call, Bill McDermott, one of the company's chief executives, said that SAP will continue to challenge Oracle for new customers, according to ZDNet. "If new customers "consider switching to a new platform or a new application from Oracle, you and I and everyone else on this call know that they're going to shop it against SAP," McDermott said.