SAP Sees ‘Very Solid Pipeline’ as Quarterly Profit Rises

SAP AG (SAP), the biggest maker of business management software, said a “very solid pipeline” of new deals will help meet growth targets as demand picks up for mobile programs and software to process large amounts of data.

First-quarter net income jumped 10 percent from a year earlier to 444 million euros ($587 million) helped by record sales in Asia, the Walldorf, Germany-based company said today. Analysts had estimated profit of 476 million euros in a Bloomberg survey.

New business fields, including software as a service run via external datacenters, rather than installed on customers’ premises, “drive a high interest from our customers, combined with our core products,” co-Chief Executive Officer Jim Hagemann Snabe said in an interview on Bloomberg Television. “In the first quarter, we saw an increase in the win ratio against competition, and that’s why, if we combine these factors, we see a strong opportunity for growth.”

SAP, which competes with Oracle Corp. (ORCL), said this month that sales growth will rise in the second quarter after a sales strategy that grouped clients by geography in North America and initially weak business in some European countries trimmed new software sales at the start of the year. SAP is betting on revenue from mobile applications, on-demand software and the real-time processing platform Hana to lift revenue to more than 20 billion euros by 2015.

SAP shares declined 0.7 percent to 48.94 euros at 10:12 a.m. in Frankfurt, paring the gain this year to 20 percent and giving the company a market value of 60.1 billion euros.

Hana Revenue

In the three months ended March 31, the company won customers for Hana including India’s United Breweries Ltd. (UBBL), posting sales of 28 million euros. Revenue from new mobile- software licenses totalled 21 million euros in the quarter. Revenue from new software licenses rose 16 percent in Asia at constant currencies, beating growth in any other region. SAP pre-released revenue and operating profit on April 13.

In the current quarter, revenue from software and software- related services will increase 14 percent to 16 percent, based on non-IFRS accounting standards and at constant currencies, after a 10 percent gain last quarter, SAP reiterated today. Software revenue is set to grow by 15 percent to 20 percent, also excluding currency swings, following an increase of just 1 percent.

“They have to get back on track with new software licenses in coming quarters,” said Heinz Steffen, an analyst at Fairesearch in Kronberg, Germany, who recommends investors buy SAP shares. “In the short term, the results were a bit disappointing, but in the longer term SAP is very well- positioned, especially with mobile and Hana.”

SAP’s co-CEOs have acquired mobile-software and database company Sybase Inc. as well as cloud-computing specialist SuccessFactors Inc. since taking over in 2010.

Sales and support revenue from cloud-computing, or software sold as an on-demand service, rose to 29 million euros in the quarter, boosted by the SuccessFactors deal and new contracts with clients including Rio Tinto Plc (RIO) and Ceva Logistics Ltd.

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 at kwong11@bloomberg.net

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