SAP had a mild shock in Q2 as software licence revenue fell for the first time in around three years. The company blamed a slowdown in the Asia-Pacific Japan region and interestingly rapid transition to the cloud. Its response was to trim its forecasts. The Frankfurt market responded by dropping the share price by c3%.
Overall revenue was up 4% yoy to €4.06bn, but that was lower than the 7% of Q1 (see here). Oracle has also had a couple of tough quarters with software revenue struggling (see here). It is early days but we expect this is a sign of things to come for both providers, as sales of traditional products slow and the business model shifts to include more subscription revenue. The numbers tell the start of the story – SAP’s software revenue fell 7% (3% cc) to €982m, while cloud subscription and support revenue rose over 200% to €159m. Cloud subscriptions are still a small proportion of the business however, and revenue lost on license sales is not all transferring to the cloud line. SAP’s challenge is managing the shift, and trying to counter business lost to SaaS competitors like Salesforce.com and Workday. It also needs HANA revenues to bulk up. Although it contributed €102m revenue during the quarter and grew 21% yoy, that is still a tiny part of SAP’s overall revenue. SAP expects HANA to generate revenue of €650m – €700m during 2013.
At the bottom line operating profit was up 7% to €988m, and profit after tax made it into double figures, showing a 10% rise to €724m. The operating margin also saw a small improvement of 0.7 percentage points to 24.3%.
These are not poor results by any means but they do reflect the changes SAP (and the wider market) is going through. SAP has a lot going for it – growing cloud assets, HANA, a strong mobile platform and a large established customer base. It is the ebb and flow of the new against the old that is the real point of interest, all played out against a tough market.