Tags: SAP | Software | Sales | Growth

SAP Predicts Software Sales Growth Will Accelerate; Shares Rise

Friday, 13 April 2012 08:25 AM

SAP AG predicts software sales growth will accelerate in the second quarter as the largest maker of business-management software benefits from demand for mobile applications and its Hana real-time analytics technology.

Revenue from software and software-related services will grow between 14 and 16 percent at constant currencies after a 10 percent increase in the first quarter, the Walldorf, Germany- based company said today. The stock gained as much as 3 percent in Frankfurt.

SAP is winning business helped by demand for applications that allow consumers and companies to access data via smartphones and tablet computers. The company this week said it plans to spend almost $500 million to lure customers to its Hana data-processing product, challenging Oracle Corp.’s dominance in the $22.5 billion database market. SAP said today that sales execution “issues” in North America, which hurt its first- quarter performance, have been resolved.

“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.

U.S. Struggle

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

The stock gained as much 1.51 euros to 52.18 euros in Frankfurt and was up 2.5 percent as of 1:14 p.m. SAP has risen 27 percent this year while Germany’s DAX benchmark index gained 14 percent.

Co-Chief Executive Officers Bill McDermott and 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.

“SAP is well positioned to capitalize on the major technology trends including big data, mobile, and cloud,” the company said today. “SAP’s and SuccessFactors’ cloud portfolio showed robust double-digit growth in billings year-over-year.”

The company today reiterated its full-year forecast. SAP on Jan. 25 said that full-year 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.

Client Base

Siemens AG, Exxon Mobil Corp. and Wal-Mart Stores Inc. 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.

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.

Oracle Competition

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.

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Friday, 13 April 2012 08:25 AM
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