SAP, the world’s largest business software maker, is profiting from acquisitions by Oracle, its US rival, as customers appear to be banking on the stability of the German company rather than committing to its fast-expanding competitor.
Contracts signed between the start of July and the end of September with companies such as Applied Materials in the US and Allianz in Germany boosted SAP’s software sales. Revenues in the third quarter were €590m ($707m), 20 per cent higher than the same period in 2004. Analysts had predicted a 12 per cent rise.
Henning Kagermann, chief executive, said SAP was outbidding Oracle because “there is uncertainty about what our competitor is doing in the future and [whether it] can deliver”. While Oracle was “stitching together companies”, SAP’s “organic growth” gave stability. This was driving sales.
SAP this year aims to hire 4,500 staff and launch products for smaller firms. Oracle, by contrast, has spent billions buying competitors such as PeopleSoft to rival SAP in the business management market. SAP said its market share had still grown by two points to 60 per cent worldwide since June – and by three points to 44 per cent in the US.
“We are putting more distance between ourselves and the competition,” Mr Kagermann said.
“It looks as though SAP is expanding its roots in sectors in which it was already the dominant vendor,” said Adam Shepherd at Dresdner Kleinwort Wassserstein. “It is raising sales as these clients favour the known quantity SAP over Oracle – though it is not carving chunks out of Oracle’s strong business with financial institutions.”
SAP said software licence sales would rise 12-14 per cent in 2005, up from a mid-year forecast of 10-12 per cent. Total revenue in the quarter rose 13 per cent to €2.01bn, and pro-forma operating income, which excludes stock-options, increased 9 per cent to €520m.
Sergio Giacoletto, Oracle’s vice president for Europe, said the US company stood by its goal to become the number one in business management. SAP “was very proud to have poached some of our clients but it was only a few of a whole host,” he told FTDeutschland, the FT’s sister paper. “Customers usually don’t switch that easily.”
Additional reporting by Thomas Fromm in Munich
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