The early indications are that SAP has had a bumper Q2 following its muted Q1 which was blighted by sales execution problems in North America (see here). The Q2 prelims recall the euphoria of its year end results (see here) but revenue growth has come at a cost – a 2.4 percentage point operating margin drop.
Total revenue for the three months to June 30 is expected to come in at €3.9bn, which is an 18% increase on last year. That includes SuccessFactors revenue, which was expected to add c2% to SAP revenue over the first full year, so even without this contribution the increase is impressive. Within that software has fared even better in terms of growth, breaking the €1bn barrier to reach €1.06bn with a 26% increase – and that is straight software licence revenue not software plus maintenance. The software and software related service revenue figure stands at €3.12bn, a 21% increase. Maintenance growth seems to be keeping pace with software growth – normally that would be a positive sign but in a cloud world, it suggests SaaS and subscriptions are not making much of an impact. Its new technology initiatives (HANA and mobile) have started to pay their way and are bringing more than trickle of new revenue at that.
The bottom line stats are not quite as exciting – overall operating profit was up 7% to €0.92bn. Q1 saw a 6% yoy increase so it is nudging the right way. The operating margin fell to 23.6%, from 26% in Q2 last year (it had also dropped yoy in Q1) with the decline due to the cost of severance payments for SuccessFactors staff, and additional headcount increases elsewhere in the business. SAP paid out a hefty €31m on SuccessFactors redundancies so a substantial number of staff must have gone which seems odd given that it sought the SaaS pure-play for its cloud expertise as much as for its HR applications.
It’s always possible to find holes in results but the big picture is that Q2 was a fine period for SAP and it achieved better growth rates than Oracle did in its most recent quarter – 1% overall revenue growth, 7% new licence revenue growth (see Oracle: rushed results but still doing the business). Whether the global picture is reflected in the region numbers remains to be seen but on the face of it, enterprises are still buying software.