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SAP Earnings Stay on Double-Digit Track
By Mark Long
October 19, 2007 10:54AM

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SAP reported double-digit growth rates right across all regions of the world, with software and software-related service revenues rising by 15 percent in the Americas and Europe as well as in the Middle East and Africa regions. SAP's growth in Japan reached 16 percent while the rest of the Asia-Pacific region reported 30 percent growth.

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   SAP
   Oracle
   Wal-Mart
   Apple
   Earnings

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   SAP said its third-quarter net income rose by 10 percent to $581.9 million from the year-ago period, with earnings per share increasing 13 percent to 49 cents. Moreover, the company said that revenue from software sales and related services grew by 16 percent to $2.42 billion.

"For our established business, we demonstrated further progress on the business process platform with a continued increase in the number of customers adopting both SAP ERP and SAP NetWeaver," said SAP CEO Henning Kagermann.

Kagermann also said SAP's share of the $35.9 billion enterprise application software market grew by 1 percent to 27 percent compared to the second quarter, and increased by 3.5 percent from the year-ago period.

Apple, Wal-Mart Wins

SAP reported double-digit growth rates right across all regions of the world. Software and software-related service revenues rose by 15 percent at constant currencies in the Americas and Europe as well as in the Middle East and Africa regions. Growth in Japan reached 16 percent while the rest of the Asia-Pacific region reported 30 percent growth.

Deputy CEO Leo Apotheker announced the signing of two major new deals with Apple and Wal-Mart during the quarter. "SAP had already been a software partner for Apple in the past, but with this Global Enterprise Agreement we will bring the relationship to a completely new and strategic level," Apotheker said. The signing of a major new deal with Wal-Mart is also "a significant competitive win for SAP in the US, and in the retail sector," he added.

Looking ahead, SAP executives said they expect software and software-related service revenues to increase at the upper end of the range of 12 percent to 14 percent, with SAP's newly introduced Business ByDesign platform for small to midsize businesses expected to drive part of the rise.

"Our plan is to continue to grow faster than the market, and we expect the growth to come by expanding our addressable market, and our coverage of that addressable market," Kagermann explained.

More Tuck-In Acquisitions

SAP said it will invest an additional $306.6 million to $427.8 million over the next five quarters to address untapped growth opportunities in segments of the mid-market. SAP said this is equivalent to reinvesting approximately one to two percentage points of margin in 2007 in order to fuel additional growth opportunities going forward.

Oracle's recent bid for BEA appears to have changed Kagermann's thinking about future acquisitions. The SAP CEO affirmed that he expected to make more technology tuck-in acquisitions, going forward. "It's a question of strategic fit and it's a question of whether you really can create value and not destroy value in bringing two entities together," Kagermann said.

Despite Wall Street's mixed reaction to SAP's offer to acquire Business Objects, Kagermann refused to rule out another large deal. "If there is an opportunity which is a perfect strategic fit, it would be wrong to rule something out," he said.