SAP saw Q3 profit decline a whooping 51% yoy due to the effect of a large one time gain in the year ago quarter, but that still left it with a comforting net profit of €618m. As the reason for the fall was a €723m gain caused when a judge reduced damages in the lawsuit with Oracle rather than current operational reasons, the fall is not cause for concern. Its 16% revenue uplift, to €3.95bn, was due to its ability to execute – aided by its Successfactors acquisition. Its growth made the most recent quarterly results from Oracle (11% revenue growth), Microsoft (down 8%) and IBM (software revenue down 1%) look decidedly downbeat.
Optimism and acquisitions are informing its outlook too as the company has increased its full year revenue outlook from a 10% to 12% revenue increase to 10.5% to 12.5%, due to the impact of the Ariba acquisition which closed at the start of October 2012. It expects sales will be at the upper end of the range.
It is its new technology areas that are of particular interest these days as they are the root of future new revenue and will determine its long-term position in the software market. Co-CEO Bill McDermott said the mobile, cloud and high-speed data analysis businesses (i.e. HANA) are all growing in triple digits and that it has “tremendous momentum in the cloud " – billings up 116%. Actual revenues are more prosaic. HANA revenue was €83m and is on track to meet full-year expectations of at least €320m. Mobile revenue was €48m and on track to meet full-year expectations of €220m. Given Q3 has just closed, it has a lot of ground to over in Q4. Cloud revenue was €63m. SAP expects its cloud business to be generating profits of €2bn a year by 2015 from its loss making position today – that would be a sterling turnaround and fantastic to see but it’s hard to how it is going to happen (see How are SAP and Oracle handling the cloud transition?). Meanwhile the traditional business continues to perform - license sales were up 17% to €1.03bn and exceeded street expectations of €993m. Support (maintenance) was up 16% to €2.1bn.
Increased sales from North America (up 37%) and China (up 40%) made up for flat sales in Europe. Hardly surpassingly, Spain, Portugal, Greece and Italy pulled European revenues down so maybe that means the UK, which is one of SAP’s strongest markets, was either flat at worst or more likely up on the year.
Overall it was another positive quarter for SAP and the momentum around its new technology areas points to alternative revenue streams. The only question is the timing to get them to reach volume levels - and end of year targets - and the ongoing question of its cloud transition of course.