SAP Sales Top Estimates as New Software Cycle Takes Hold

  • Forecast for 2016 seems conservative, Baader-Helvea says
  • S/4 Hana customers reach 2,700, double end of previous quarter

SAP SE reported fourth-quarter sales and profit that topped analysts’ estimates as businesses signed deals for its latest flagship software.

Revenue rose 16 percent to 6.35 billion euros ($6.9 billion), Walldorf, Germany-based SAP said in a statement early Tuesday, topping the average 6.04 billion-euro estimate of analysts surveyed by Bloomberg. Adjusted operating profit rose 7 percent to 2.28 billion euros, compared with the average 2.26 billion-euro estimate.

Chief Executive Officer Bill McDermott is using a revamped version of SAP’s core business-management software, called S/4 Hana, that can run in customers’ data centers or as an online service to keep tens of thousands of clients in the company’s fold amid a shift to cloud computing. At the same time SAP is adding subscription revenue from acquired cloud software, which customers rent as an online service without the expense of owning and updating it themselves.

SAP said more than 2,700 customers are running the new suite, more than double the number at the end of the third quarter.

“The S/4 HANA cycle is gaining traction,” said Knut Woller, an analyst at Baader-Helvea, in a report today. “In addition, the company provided a solid outlook on 2016 that seems to contain some conservatism in terms of license growth, in our view.”

SAP rose 2.5 percent to 73.40 euros at 9:10 a.m. in Frankfurt. The shares have risen 29 percent in the past year compared with a 0.7 percent rise in Germany’s Dax Index.

Operating profit this year will be 6.4 billion euros to 6.7 billion euros, SAP said, compared with analysts’ average estimate for 2016 profit of 6.7 billion euros.

The preliminary results come ahead of SAP’s scheduled Jan. 22 earnings report, when it plans to hold a press conference with McDermott and Chief Financial Officer Luka Mucic.

SAP is the leader in the $30 billion market for enterprise resource planning software, where it competes with Oracle Corp. and Workday Inc. for applications that run businesses’ finances, logistics and human resources, according to market researcher Gartner. It also competes with Inc. in the $26.9 billion market for customer management software.

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