SAP confident of continuing IT investment

SAP, the world’s largest business software maker by sales, said companies were continuing to invest in information technology in spite of the uncertain macroeconomic environment, allowing the German company to deliver third-quarter sales figures that beat market expectations.

SAP’s software and software-related service revenues jumped 16 per cent to €2.7bn in the three months to September 30. The preliminary figures are based on international financial reporting standards and include currency changes.

“The record quarter was driven by strong results across all regions,” Bill McDermott and Jim Hagemann Snabe, SAP’s co-chief executives said in a statement.

“SAP’s pipeline remains very strong and companies continue to invest in IT, in particular in innovative software solutions,” the Frankfurt and New York-listed business, said.

SAP’s total of €3.41bn in quarterly revenue represented an increase of 14 per cent on the same period a year earlier and beat a €3.32bn consensus estimate conducted by Thomson Reuters I/B/E/S, spurring its shares to a gain of more than two per cent on Friday.

Operating profits more than doubled from €716m to €1.76bn, after the German business software group reduced by €723m a provision set aside to cover damages arising from a copyright dispute with rival Oracle.

A US court last month overturned the original $1.3bn award against SAP concerning its former US subsidiary and said Oracle should receive no more than $272m or there should be a new trial.

Since taking over last year, SAP’s co-chief executives have sought to shake off the company’s staid image, repair strained customer relations and increase investment in innovative areas such as mobile applications and cloud computing.

SAP’s so-called “in-memory technology” that aims to push data closer to the processors that work on it has won praise from industry analysts but still represents only a small fraction of the company’s sales. The company is targeting €20bn in total revenues by the midpoint of the decade, compared with €12.5bn last year.

“After a period of uncertainty, due to changes in management ... SAP has embarked on a massive, ambitious and visionary effort to refresh its technology platform,” Gartner analysts wrote in a note to clients.

“Although still rough around the edges and incomplete, SAP’s strategy is likely to shake up the application infrastructure market and put extraordinary competitive pressure on the megavendors, including IBM, Microsoft and Oracle.”

In spite of a successful quarter, SAP said it was maintaining its full-year guidance due to the “ongoing uncertain macroeconomic environment”.

The company expects full-year software and service-related revenue to increase by between 10-14 per cent on last year’s €9.9bn at constant currencies and based on non-IFRS, but expects to reach the upper end of the range. SAP reports full results for the third quarter on October 26.

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