SAP enjoyed a rise in revenues for its most recent quarter, suggesting some success in its current strategy. SAP faces competition from Oracle, Microsoft and others.
SAP reported a rise in revenue for the most recent quarter,
suggesting the company can hold its own in the face of fierce competition from
Oracle, Microsoft and other tech giants.
SAP's software revenue rose 35 percent, and total revenue 27
percent, from the year-ago quarter. Operating profit declined 47 percent
year-over-year, supposedly impacted by the company's TomorrowNow lawsuit with
Near the end of 2010, Oracle filed a lawsuit claiming that
SAP's TomorrowNow subsidiary stole its software documentation and confidential
material via unauthorized access to a customer support Website. SAP
acknowledged that the illegal downloads took place, but insisted it never saw
the data. Oracle won a $1.3 billion judgment, which SAP's
legal counsel is trying to reduce in court
"SAP intends to file post-trial motions in the coming weeks
asking the Court to reduce the amount of damages awarded, or to order a new
trial," read SAP's explanation, included in its July 26 earnings statement.
"Because the motions have not yet been filed and the outcome remains uncertain
the amount by which the jury award would be reduced cannot be reliably measured
at this time." In other words, the bottom-line impact of the case could change
in coming months.
All that aside, SAP's bump in revenue suggests its newfound
strategy of targeting SMBs (small to midsize businesses) is paying off in a
significant way. The company had famously struggled to find its way in the wake
of the global recession, which greatly impacted its clients' bottom lines and
willingness to spend heavily on enterprise IT. The company's revenues had
dipped throughout 2009, eventually leading to the ouster of then-CEO Leo
Apotheker in February 2010.
Since then, SAP has seen its
revenues increase, despite some
accounting-sheet headwinds thanks to its $5.8 billion acquisition of Sybase in
May 2010, a move widely seen as a way to expand SAP's mobile offerings and stay
competitive via new revenue streams. That also marked SAP's largest purchase
since its $6.7 billion takeover of business intelligence software producer
BusinessObjects in 2008.
"Our results prove that SAP is back to being a growth
company," Bill McDermott, co-CEO of SAP, said
in a July 26 statement. "We showed rock solid revenue across the globe,
particularly in the fast growing emerging markets where customers still have
the most choice and are rapidly expanding their businesses."
The question is whether SAP can maintain momentum,
particularly in those emerging markets. Rajeev Bahl at Matrix Research
suggested to Reuters July 27 that SAP's "organic license growth has outpaced
that of Oracle," while JP Morgan analyst Stacy Pollard estimated that the
company enjoyed an increase in both deal number and size. However, SAP's
opponents in the business IT space aren't exactly known for their wallflower
tendencies: Expect competition to only increase in coming quarters.
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