SAP Reports Q3 Profits Up 10%

The software maker said the increase resulted from revenue growth in software sales and related services.

SAP announced Oct. 17 that its third quarter net profits increased 10 percent, thanks to strong revenue growth from software sales and related services.

The software giants revenues rose to $578.8 million in the third quarter, up from $529 million in the same quarter last year. Software and software-related services shot up 13 percent, to $2.50 billion.

Software sales is a key metric as SAP wages an increasingly fierce battle with rival Oracle, a company that has acquired other business applications companies at a dizzying rate, all in an effort to knock SAP, based in Walldorf, Germany, out of its number one business applications provider spot.

SAP officials pointed out in their third-quarter call that research firm Gartner recognized SAP as the worldwide 2006 market share leader in ERP (enterprise research planning) CRM (customer relationship management) and SCM (supply chain management).

SAP CEO Henning Kagermann noted in a statement that the company reported "double-digit growth in software and software-related services revenues in each region and additional share gains among core enterprise application vendors."

To better compete in the business intelligence sector—one that is quickly being targeted by most software vendors—SAP recently announced the $6.86 billion acquisition of Business Objects. The software, which helps users analyze data to improve their business performance, is increasingly important to customers of SAP and other software makers as they try to squeeze the best source of information out of their ERP systems.

On Oct. 12, Oracle, of Redwood Shores, Calif., announced that it wanted to acquire middleware developer BEA Systems for almost $6.7 billion. BEA declined Oracles unsolicited bid, giving rise to speculation among analysts that SAP would make a counter-offer for BEA, of San Jose, Calif.

But Kagermann refused to comment about SAPs designs on BEA during the Oct. 17 earnings call. He later told CNBC Europe that "you can never rule out strategic acquisitions, even not large ones." But when asked if SAP would counter-bid for BEA, Kagermann reportedly responded that SAP is quite happy with its own NetWeaver integration platform.

SAP officials said that key events in the third quarter included two high-profile customer wins—Apple and Wal-Mart Stores. The retail giant is using SAP ERP Financials to support its global expansion; Wal-Mart plans to implement SAPs financials globally in phases, with a completion date scheduled for sometime in 2010.


Click here to read about how Oracle was snubbed by BEA.

Wal-Mart, one of the worlds largest retailers, is a big win for SAP in its battle with Oracle in the retail vertical. Its also a long-awaited trump of sorts for SAP, which was bested by Oracle in the retail sector two years ago, when Oracle outbid SAPs $525 million offer for Retek, a retail software provider.

Another major milestone for the quarter was SAPs release of Business ByDesign. Officials said that costs for BBD increased to $50 million in the third quarter, up from $43 million in the second quarter.

Software revenues for SAPs third quarter saw another "double-digit increase" moving up 11 percent to more than $1 billion, up from $917 million in the same year-ago quarter.

Total revenues for the third quarter were reported at $3.46 billion, an increase of 9 percent over the third quarter in 2006.


Check out eWEEK.coms for the latest news, reviews and analysis about productivity and business solutions.