SAP AG (SAP), the largest maker of business-management software, is beating rivals to software contracts as companies limit their spending amid slowing economies, its co-chief executive officer said.
“We are now taking very strong market share” with second- quarter sales growth exceeding 10 percent in “flat markets,” Jim Hagemann Snabe said today in a Bloomberg Television interview. “While the worries are there about the euro, companies are still investing, and software is one the areas they invest in to manage this new area of uncertainty.”
Growth in information-technology spending in Europe, the Middle East and Africa was “minimal” because of the debt crisis, with governments also canceling or renegotiating contracts, SAP said in its second-quarter report today. By contrast, the Walldorf, Germany-based company’s revenue from new software licenses in the region grew 20 percent excluding currency swings in the three months ended June 30, boosted by programs for mobile devices, the Hana analytics software and applications delivered via the Web.
Growth was “solid” in markets including France, Spain and Germany, Snabe said. SAP will rely on increasing revenue rather than on cost cuts to lift profitability after its operating margin declined in the second quarter, he said, adding that SAP had “front-loaded” investments into the first part of 2012.
SAP rose 0.5 percent to 49.29 euros at 9:52 a.m. Frankfurt time. It had advanced 20 percent this year through yesterday.
The company confirmed its full-year forecast. SAP predicts operating profit, excluding some items, of 5.05 billion euros ($6.12 billion) to 5.25 billion euros and adjusted software and related service revenue growth of 10 percent to 12 percent. Both forecasts assume constant currencies and include the acquisition of SuccessFactors Inc., completed this year.
Snabe and co-CEO Bill McDermott further stepped up SAP’s rivalry with Oracle Corp. (ORCL) by agreeing to buy Ariba Inc. (ARBA) in May for $4.3 billion. SAP plans to generate two thirds of its growth from software that the company develops by itself, with the rest coming from acquisitions, Snabe said. The company pursues a target of exceeding 20 billion euros of revenue by 2015, up from 14.2 billion euros last year.
SAP on July 12 reported software-license revenue that exceeded analysts’ estimates. The operating margin, based on non-IFRS standards the company uses for internal forecasts, declined 0.8 percentage points to 30 percent, partly as a consequence of the acquisition of cloud-software operations, which tend to have lower margins.
Oracle, based in Redwood City, California, last month reported software-license growth of 6.7 percent in the quarter ending in May. Salesforce.com Inc. (CRM), a San Francisco-based provider of online customer-management software, on May 17 raised its revenue forecast for its fiscal year 2013 after signing more large deals with corporate clients.
SAP said today its Hana software, which lets clients process large amounts of data quickly in a computer’s memory by bypassing slower hard drives, is on track to reach its 2012 revenue target after second-quarter sales were 85 million euros. Mobile revenue was 54 million euros, and cloud products generated 69 million euros, SAP said.
Net income advanced to 661 million euros, or 55 cents a share, from 587 million euros, or 49 cents, a year earlier. Analysts predicted 643.7 million euros. Net income, adjusted for some items, increased to 831 million euros from 703 million euros. Revenue rose 18 percent to 3.9 billion euros.