October 22, 2019 / 8:44 AM / a month ago

Software AG says faster takeup of subscription model to squeeze 2020 margins

BERLIN, Oct 22 (Reuters) - Software AG said on Tuesday its shift towards a subscription-based model was on track but cautioned that rapid adoption could squeeze margins by more than originally forecast next year.

Chief Financial Officer Arnd Zinnhardt told analysts on a call that the margin squeeze could be between 200 and 300 basis points - more than the 200 basis points the company had forecast when it announced the shift earlier this year.

He added, however, that this was “not a negative, but a positive sign” as the German information technology company sets its sights on more stable revenue streams from subscriptions than those under its old licence-based business model.

Software AG shares rallied by 9% after the company bounced back in the third quarter, with CEO Sanjay Brahmawar’s strategy overhaul and a restructuring of its North American sales operation delivering first results. (Reporting by Douglas Busvine, editing by Riham Alkousaa)

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