SAP's HANA, Cloud Software Key to Improved Q3 Profits
SAP, empowered by growing interest in its HANA in-memory database and a sharp increase in its cloud software business, beat Wall Street estimates in its quarterly earnings report Oct. 21, and the stock price zoomed as a result.
HANA, the creation of SAP co-founder Hasso Plattner, brought $204 million to the revenue line in the third quarter, up from $134 million in the second quarter, for impressive year-to-year growth of 79 percent.
SAP revealed that revenue was tallied at $5.5 billion for the quarter, a 2 percent improvement over the year-ago period. Earnings per share were $1.03, beating the analysts' consensus that predicted 98 cents.
The stock price closed on an increase of 3.6 percent to $76.41 and was up slightly to $77 in after-hours trading.
SAP's HANA DB, launched in December 2010, takes advantage of the low cost of main memory (RAM), data processing abilities of multi-core processors and the fast data access of solid-state drives relative to traditional hard drives to deliver better performance of analytical and transactional applications.
It offers a multi-engine query-processing environment, which allows it to support both relational data—with both row- and column-oriented physical representations in a hybrid engine—as well as graph and text processing for semi-structured and unstructured data management within the same system.
"The SAP HANA product continues to be the industry standard in the software industry," CEO Bill McDermott explained to analysts and members of the press on the company's earnings conference call. "While our competitors are making a lot of noise while they try to catch up, this simply validates our leadership position. We are going to step on the accelerator."
McDermott said SAP's cloud computing subscriber base is the industry's best with 33 million users. Cloud software and services revenue was up 79 percent at $522 million, a sharp increase from $240 million in the previous quarter.
McDermott claims SAP is now the second-largest cloud business in the world--behind Amazon and bigger than Oracle.
"You can see from these results that we are leading the cloud movement," McDermott said. "SAP is winning in the cloud because we offer customers a suite of solutions tightly integrated with each other."
The company's software business, meanwhile, was up 5 percent year-over-year at $4.6 billion after totaling $4.39 billion in the second quarter.