Bloomberg News

SAP Predicts Rising Software Revenue in Second Quarter

April 13, 2012

SAP AG Co-Chief Executive Officers Bill McDermott, left, and Jim Hagemann Snabe, right, aim to lift sales to more than 20 billion euros by 2015, compared with 14.2 billion euros last year. Photographer: Hannelore Foerster/Bloomberg

SAP AG Co-Chief Executive Officers Bill McDermott, left, and Jim Hagemann Snabe, right, aim to lift sales to more than 20 billion euros by 2015, compared with 14.2 billion euros last year. Photographer: Hannelore Foerster/Bloomberg

SAP AG (SAP) predicted software sales growth will accelerate in the second quarter after it revamped its North American sales operations and demand for analytics and mobile applications is picking up in Europe.

Revenue from software and software-related services will increase 14 to 16 percent at constant currencies after a 10 percent gain in the first quarter, the largest maker of business-management software said today.

SAP is benefitting from demand for applications that allow consumers and companies to access data via smartphones and tablet computers. Walldorf, Germany-based SAP said today it changed its North American operations to tailor sales teams around specific industry groups after the previous structure, which had grouped clients by geography and industry, hurt first- quarter revenue.

“We adjusted the leadership team where we needed to,” Co- Chief Executive Officer Bill McDermott said on a conference call today. “Some of the deals that didn’t happen in the first quarter have already happened,” he said, adding that the company’s pipeline is “very strong.”

U.S. Revamp

Robert Courteau, president for North America, left the company at his own request after 15 months in the job, SAP said last week. Robert Enslin, head of global sales who previously held the post, assumed Courteau’s responsibilities until a replacement is found. The U.S. business accounted for 26 percent of SAP’s revenue last year, according to Bloomberg data. Software revenue in the Americas region declined 4 percent in the first quarter.

SAP declined 1.4 percent to 49.94 euros while Germany’s benchmark DAX Index dropped 2.4 percent. The stock has risen 22 percent this year, compared with a 12 percent gain for the DAX.

First-quarter operating profit climbed to 834 million euros ($1.1 billion), missing an 866 million-euro average estimate in a Bloomberg survey of analysts. Software sales growth, an indication of future revenue, slowed to 1 percent from 17 percent in the fourth quarter. Oracle’s new license revenue grew 7 percent to $2.37 billion in the quarter that ended Feb. 29.

‘Skinned Knee’

“We characterize this as a ‘skinned knee’ and not a broken leg and expect the company to be back on track in the second quarter,” Nomura’s analysts said in a note today. “Issues do not appear to be so much macro as company-specific execution and follows a very robust fourth quarter.”

In the current quarter, software revenue is set to grow by 15 to 20 percent, SAP said.

“The fact that they’re so upbeat on the coming months outweighs any difficulties they may have had in the past quarter,” Markus Friebel, an analyst at Independent Research GmbH in Frankfurt, said via phone.

Markets across Europe, the Middle East and Africa will have “robust” growth in the current quarter after some countries had a “slow” start to the year with the exception of Germany which was “off to a blistering start,” McDermott said.

McDermott and co-CEO Jim Hagemann Snabe aim to lift sales to more than 20 billion euros by 2015, compared with 14.2 billion euros last year. To get there and keep up with rival Oracle, the executives have accelerated the pace of SAP’s acquisitions, adding mobile-software and database provider Sybase Inc. in 2010 and cloud-computing specialist SuccessFactors Inc. this year.

Real-Time Analytics

The company today reiterated its full-year forecast. SAP on Jan. 25 said that 2012 operating profit, based on the non-IFRS accounting standard and excluding currency swings, will be in a range of 5.05 billion euros to 5.25 billion euros.

Siemens AG (SIE), Exxon Mobil Corp. and Wal-Mart Stores Inc. (WMT:US) are among more than 176,000 companies that use SAP’s applications to order goods, plan inventory levels and manage sales. SAP also provides software for the order fulfillment system behind Apple Inc.’s iTunes download system.

McDermott and Snabe want to expand SAP’s customer base from information-technology staff in back offices to include salespeople wielding mobile devices and smaller clients more willing to adopt on-demand applications.

The company this week said it plans to spend almost $500 million to lure customers to its Hana data-processing product, challenging Oracle Corp. (ORCL:US)’s dominance in the $22.5 billion database market.

Hana is designed to quickly analyze vast caches of sales and operational information, as well as unstructured data such as e-mail and social media. It relies on computer memory, rather than disk drives, to speed up the process.

Doubling Hana Sales

Sales of the Hana technology totaled 160 million euros in 2011, beating SAP’s own forecast by 60 percent. McDermott in January forecast that revenue from Hana products will more than double this year.

The company will probably continue to benefit from a one- year head-start in that product category compared with Oracle, Donald Feinberg, an analyst at Gartner Inc. in Sao Paulo, said in January.

Oracle CEO Larry Ellison in October unveiled the so-called Exalytics Intelligence Machine, which also analyzes information within dynamic random access memory. Sanjay Poonen, SAP’s president of global solutions, at the time said Oracle’s approach requires clients to buy and maintain more hardware than a competing SAP system.

To contact the reporter on this story: Cornelius Rahn in Frankfurt at crahn2@bloomberg.net

To contact the editor responsible for this story: Simon Thiel at sthiel1@bloomberg.net


Later, Baby
LIMITED-TIME OFFER SUBSCRIBE NOW

(enter your email)
(enter up to 5 email addresses, separated by commas)

Max 250 characters

Companies Mentioned

  • WMT
    (Wal-Mart Stores Inc)
    • $77.66 USD
    • 0.44
    • 0.57%
  • ORCL
    (Oracle Corp)
    • $40.08 USD
    • -0.05
    • -0.12%
Market data is delayed at least 15 minutes.
 
blog comments powered by Disqus