Business

Europe's biggest tech company is being hurt by the trade war

Posted July 18, 2019 4:32 a.m. EDT

— Rising trade tensions are hurting Europe's most valuable tech company.

German business software group SAP said Thursday that second quarter profits dropped 21% to €827 million ($930 million) because of restructuring costs and trade uncertainty.

SAP's revenue from software licenses dipped 5% due to "trade-related uncertainty in Asia," the company's finance chief Luka Mucic said.

Investors had been expecting better results, and shares in the company dropped 7% in Frankfurt despite the group reiterating its full-year outlook.

"With continued strong customer demand and our tight focus on profitability we remain as confident in our 2019 outlook as we are in our mid-term ambition," Mucic said.

SAP has a market value of roughly €147 billion ($165 billion). Activist investor Elliott, a US hedge fund, revealed in April that it had taken a stake in SAP as the company seeks to expand its cloud computing business and improve its profit margins.

SAP said that revenue from cloud computing increased 40% in the second quarter to €1.7 billion ($1.9 billion). Overall sales increased 11% to €6.6 billion ($7.4 billion). Analysts were expecting sales of €6.7 billion ($7.5 billion), according to Refinitiv.

President Donald Trump has imposed tariffs on Chinese exports and targeted one of the country's most successful tech companies, Huawei. That has provoked retaliatory measures by China and stoked uncertainty among businesses around the world.

The spat has badly hurt American farmers, increased costs for US businesses and slowed the global economy. German exporters, which sell a huge amount of goods into China, have also been put under pressure.

Conditions could worsen further: Trump has threatened to impose tariffs on all exports from China if the countries can't agree a deal on trade.