SAP Announces Solid Third Quarter

 
 
By Renee Boucher Ferguson  |  Posted 2006-10-19 Email Print this article Print
 
 
 
 
 
 
 

The company fends off Oracle, and hints at new on-demand services for the midmarket.

SAP AG, after a less-than-stellar second quarter, rebounded nicely in its third quarter of 2006 with a 16 percent increase in new software license sales.

In the third quarter, announced Oct. 19, SAPs new license revenues rose to $866 million. But while SAP beat analyst expectations of $848 million in new license sales the company put a damper on its full-year software earnings expectations.
SAP is sticking to its guns with expected license revenue increases between 15 and 17 percent for the year, but said that the company is unlikely to reach the upper end of its guidance.
"From todays perspective, it appears less likely that product or software revenue growth will reach the upper end of the aforementioned ranges," said SAP Chief Financial Officer Werner Brandt, during the companys Q3 earnings call with analysts and press. Despite the cautious gesture—which some analysts suggest stems from increasing pricing pressure from main rival Oracle—SAP did say that it is likely to exceed its earnings-per-share guidance for 2006 of $7.32 to $7.54. SAPs third revenues of $2.84 billion were in line with analyst expectations.
SAPs CEO Henning Kagermann said pricing is "tough but its stable." During the earnings call, SAP pointed to some strong metrics for growth in the quarter. In the midmarket the companys channel partners grew 22 percent and customers grew 36 percent. NetWeaver, SAPs integration and development platform, took in $526 million for the quarter, with 21 percent of earnings from stand-alone sales. SAPs ecosystem also continues to grow, with about 1,500 companies now "powered by" or certified on NetWeaver, and a growing software developer network with one half million registered developers. "Our market share stood at 22.6 percent at the end of the third quarter," said Henning Kagermann, during the Oct. 18 call. "That compares to Oracle at 9.9 percent and Microsoft Business Solutions at 4.9 percent." Kagermann said SAPs market gain is driven by the companys strategy to grow the company organically, rather than by acquisitions. "In a nutshell our organic strategy has allowed us to win," he said. And for the most part, Kagermann is right. In the face of Oracles double-digit billion dollar spend on software acquisitions over the past two years, SAPs several technology buys—A2i, for example—look tiny in comparison. And the company has continued to deliver on its Enterprise Services Enterprise strategy, announced three years ago, on a timely basis. But one thing is clear, Oracle has SAP running—maybe not for market share, but for market perception. Some analysts agree. SAP achieves Java EE 5 certification. Click here to read more. "While SAP clearly holds the lions share of the enterprise applications market, Oracles aggressive marketing and interpretation of data seem to have put SAP on the defensive," wrote Software Business Quarterly senior analyst Stuart Williams in a research note released Oct. 19. "While SAP forced Oracle to spend $20 billion to aggregate a competitive applications portfolio, Oracle is forcing SAP to refute a continuous string of claims of customer defection, of market share losses, of missed product deadlines and broken product roadmaps." During the Q3 earnings call, both Kagermann and Leo Apotheker, president of customer solutions and operations, refuted a recent claim by Oracle that it had nearly 100 recent market wins over SAP. Next Page: Expect SAP to buy some companies.



 
 
 
 
 
 
 
 
 
 
 

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