SAP Says Effect of Pandemic Likely to Weigh on 2021 Revenue

(Bloomberg) -- SAP SE said annual cloud and software sales may decline as much as 4% as the economic effects of the coronavirus pandemic continue to weigh on the company through at least the first half of the year.

The corporate software maker said 2021 cloud and software revenue, excluding some items, will be as much as 23.8 billion euros ($28.9 billion) in constant currency. When currency is adjusted, revenue may fall as much as 4% from a year earlier, Walldorf, Germany-based SAP said Thursday in a statement.

“This outlook assumes the Covid-19 crisis will begin to recede as vaccine programs roll out globally, leading to a gradually improving demand environment in the second half of 2021,” the company said.

SAP has spent years attempting to move away from legacy, or on-premise, software that resides in clients’ computer servers, to cloud-based software, which is delivered over the internet. Current CEO Christian Klein is trying to develop such software, after his predecessors relied on acquisitions to do so. SAP has seen uneven results in this modernization effort and the company has twice in the past year warned that the pandemic would stymie client deals.

SAP, which was set to report earnings later this month, said fourth-quarter revenue declined 6% to 7.54 billion euros, in line with analysts’ average estimate of 7.5 billion, according to data compiled by Bloomberg.

SAP has said it expects limited growth and margin improvement over the next two years, and moved expectations to meet its 2023 strategy plan out to 2025.