January 25, 2012 9:05 am

SAP bullish as it brushes off slowdown

SAP has shrugged off Europe’s economic slowdown as the world’s biggest business software maker by sales indicated it may raise its 2015 sales goal after achieving record annual profits and setting double-digit growth targets for this year.

The bullish message from SAP contrasts with gloomy news from Oracle, its biggest rival, which sent shivers through the technology sector last month when it reported an unexpected slowdown in sales growth and earnings that sparked worries about corporate IT spending.

But IBM and Intel were among the tech companies that last week reported solid margins, raising hopes that the sector can withstand a sluggish economy.

Bill McDermott, SAP’s co-chief executive, told the Financial Times in an interview: “If you look at Italy, Spain, Portugal – parts of Europe that people have expressed concern on – we’ve grown over 20 per cent in these markets.”

“Optimism is a free stimulus: sometimes it really does intrigue me that people are so hell-bent on selling themselves into a recession instead of getting focused on innovation, their customers, their people, and leading in a certain sense.”

“It’s one of the things that more people who have the reins of companies need to do. They need to take charge,” he added.

In December, SAP agreed to buy SuccessFactors, a provider of cloud-based human resource management software, for $3.4bn to boost its presence in the fast-growing cloud computing segment.

At the time, SAP said the SuccessFactors deal might help it reach €21bn in sales by 2015 compared with the German company’s €20bn target.

But Mr McDermott said on Wednesday: “I’m confident that we have at least €21bn-plus [of sales in 2015] at this stage of the game.”

“Once we bring SuccessFactors on and we get that really rolling, and we see where we’re at the end of 2012, it may be time to adjust it even more.”

SAP’s total revenues increased 14 per cent to €14.2bn last year, excluding the takeover of SuccessFactors, which is yet to close.

Since taking the reins at SAP in February 2010, Mr McDermott and co-chief executive Jim Hagemann Snabe have reinvigorated a tired brand, restored the trust of a once restless workforce, embedded a new strategy and chalked up eight consecutive quarters of double-digit software revenue growth – a closely watched metric due to opportunities for further service-related business.

SAP’s shares have increased by about 9 per cent during the past year, outperforming most German blue-chip stocks.

New products in mobile, cloud computing and so-called “in memory computing” – which allows users to rapidly analyse vast quantities of data – are helping to fuel growth at SAP, prompting Mr McDermott to characterise the 40-year old company as a start-up in certain respects.

Overall, SAP said it expected software and software-related services revenue to increase 10-12 per cent this year.

Operating profit was expected to increase from a record €4.7bn last year to between €5.05bn and €5.25bn, or as much as 11.5 per cent. The figures are at constant currencies and are not based on international financial reporting standards.

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