SAP ‘Outshines’ Oracle as Software Sales Exceed Estimates
SAP AG (SAP), the largest maker of business-management software, reported fourth-quarter sales and profit that beat analysts’ estimates, triggering the steepest jump by its stock in more than four months in Frankfurt.
Revenue from software and related services climbed 12 percent to 3.72 billion euros ($4.7 billion) under accounting methods SAP uses for its forecasts, the Walldorf, Germany-based company said today. That compared with the 3.6 billion-euro average estimate in a Bloomberg survey of analysts. Operating profit gained 10 percent, also topping projections.
Stepping up rivalry with Oracle Corp. (ORCL), Co-Chief Executive Officers Bill McDermott and Jim Hagemann Snabe bolstered SAP last month with the $3.4 billion acquisition of SuccessFactors Inc. Oracle shares fell the most in more than nine years on Dec. 21 after the Redwood-City, California-based company reported profit and sales that missed estimates.
“They outshone Oracle,” said Mirko Maier, an analyst at Landesbank Baden-Wuerttemberg in Stuttgart with a “hold” rating on SAP shares. “It’s a very positive statement, since they kept more than they promised and calmed investors after the disappointment at Software AG.”
This week, smaller rival Software AG slumped 20 percent within one day after earnings missed projections. Helped by demand for its Hana real-time analytics software, SAP held up while slower economic growth in the U.S. and the risk of a recession across the euro zone is making governments and businesses more wary of spending.
Shares Jump
SAP, down 1.2 percent before the release, jumped as much as 4.3 percent to 43.24 euros and traded 3.4 percent higher as of 4:54 p.m. in Frankfurt, valuing the German company at 52.7 billion euros. Oracle slipped 0.6 percent in New York trading.
Software sales, a predictor of future revenue, climbed 16 percent to 1.74 billion euros in the fourth quarter, SAP said today. Oracle’s new license revenue grew 2 percent to $2.05 billion in the quarter ended Nov. 30.
“They’re benefiting from Oracle’s customer base being upset about the prices and contract negotiations and I think it’s finally coming out,” said Donald Feinberg, an analyst at Gartner Inc. in Sao Paulo.
SAP plans to report detailed earnings and state its outlook for 2012 on Jan. 25.
Beating Forecasts
The software maker exceeded its 2011 growth forecast for sales from software and related services, as revenue grew 17 percent at constant currency compared with the 14 percent higher end of its forecast, based on non-international financial reporting standards. SAP also beat its profit forecast for the year.
New contracts in the past quarter included deals with Royal Bank of Scotland Plc, French computing services provider Atos SA and German public health insurer AOK. SAP also completed the purchase of business-to-business networking provider Crossgate AG and announced a $2 billion spending plan in China.
Germany, Europe’s largest economy, contracted by about 0.25 percent in the fourth quarter from the third, the Federal Statistics Office said this week.
“In an uncertain environment, SAP delivered the best year in its 40 year history,” the co-CEOs said in a statement. “We gained significant market share and achieved double-digit growth across all regions.”
Hana Technology
Sales of the Hana in-memory computing technology totaled 160 million euros in 2011, beating SAP’s own forecast by 60 percent. The company will probably continue to benefit from a one-year head start in that product category compared with Oracle, Gartner’s Feinberg said.
Siemens AG, Exxon Mobil Corp. and Wal-Mart Stores Inc. are among more than 176,000 companies that use SAP’s applications to order goods, plan inventory levels and manage sales. The company is trying to sell them mobile software gained through the Sybase acquisition and Hana, which lets companies analyze data in a computer’s memory instead of through slower disk drives.
SAP aims to boost annual revenue to more than 20 billion euros by 2015 with the help of cloud-computing software, mobile applications and Hana.
Global software revenue is set to grow 5.8 percent this year, helped by demand from companies wanting to move computing resources to external server centers, as well as the need to process large datasets and increased use of mobile devices, according to research firm IDC.
To contact the reporter on this story: Cornelius Rahn in Frankfurt at crahn2@bloomberg.net
To contact the editor responsible for this story: Kenneth Wong in Berlin at kwong11@bloomberg.net
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