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 Oracle.
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.