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SAP Sees `Limitless' Potential in `Second Home' China

SAP AG aims to make China “a second home” as local companies seeking management tools and real-time business intelligence will provide “limitless growth” for the software maker, co-Chief Executive Officer Bill McDermott said.

“The potential here is just thrilling, so we want to treat China as if it’s a second home,” McDermott said in an interview today in Beijing. “If you look at this market, the fantasy of what we could be in this market will exceed anything that a CFO could put on a spreadsheet, so let’s go for the big dream.”

The world’s biggest maker of business-management software has said it will rely on organic growth rather than acquisitions after purchasing Sybase Inc. for $5.8 billion in July to accelerate expansion in the mobile-applications market. Sybase will figure prominently in the China growth strategy as Sybase Chief Executive Officer John Chen has “rich relationships” in the nation that SAP can build on, McDermott said.

SAP is already doing some product and technology development in Shanghai, and the company plans to “innovate in China, for China,” McDermott said. He declined to provide any projections for revenue or growth in the country. The Walldorf, Germany-based SAP derived 13 percent of its 10.7 billion euros ($13.7 billion) in sales from the Asia Pacific region last year.

Photographer: Andrew Harrer/Bloomberg

SAP AG Co-CEO Bill McDermott said the company plans to “innovate in China, for China." Close

SAP AG Co-CEO Bill McDermott said the company plans to “innovate in China, for China."

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Photographer: Andrew Harrer/Bloomberg

SAP AG Co-CEO Bill McDermott said the company plans to “innovate in China, for China."

SAP rose as much as 61 cents, or 1.7 percent, to 35.94 euros and was up 1.5 percent as of 12:04 p.m. in Frankfurt trading. The stock has gained 8.6 percent this year, valuing the company at 44 billion euros.

‘Game Changer’

“When you think about the combination of SAP and Sybase, both in their own right were doing extremely well in China,” McDermott said. “To combine that force into solutions that really do take the customer to a new level is a game changer and it was one of the reasons Sybase was so attractive to us.”

With Sybase, the German software maker is seeking to add products that help corporate customers run applications on mobile devices and enable it to expand into software that can be used on Apple Inc.’s iPhone and iPad.

By 2014, 90 percent of the world’s population will have a mobile device and there will be 6.5 billion mobile connections, according to research firm Gartner Inc. The market for mobile device management software will grow to $382.7 million in 2014 from $265.3 million in 2009, according to research firm IDC, SAP said last month.

McDermott, who works from an office in Newtown Square, Pennsylvania, and co-CEOJim Hagemann Snabe in Germany took the helm at SAP in February.

Siemens AG, Exxon Mobil Corp. and Wal-Mart Stores Inc. are among customers using SAP software to order goods, plan inventory and deliveries, and manage sales. SAP also provides software behind Apple’s iTunes media download service.

‘Global Uptick’

SAP is seeing “a global uptick” in business, McDermott said.

“Businesses have growth back on the agenda again,” McDermott said. “CEOs know that they can’t cut their costs and succeed forever. Now they’re saying, ‘how am I going to grow, how am I going to open the global market?’ The pipeline worldwide looks very promising.”

--Edmond Lococo, Stephen Engle. Editors: Jonathan Annells, Suresh Seshadri.

To contact Bloomberg News staff for this story: Edmond Lococo in Beijing at +86-10-6649-7507 or elococo@bloomberg.net; Stephen Engle in Beijing at +86-10-6649-7582 or sengle1@bloomberg.net.

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