SAP business mix slowly shifting to cloud

SAP expects a 2% rise in Q4 revenue, with the proportion from cloud subscriptions and support up 66%

SAP's business is gradually shifting to the SaaS (software as a service) model while sales of its Hana in-memory database platform continue to grow quickly, according to preliminary fourth-quarter and year-end results the company released Friday.

Software revenue for the quarter ended Dec. 31 fell 2% on an IFRS (international financial reporting standards) basis to $2.58 billion, while cloud subscriptions and support jumped 66% to $284 million, SAP said.

Software and related services revenue, which includes the lucrative annual maintenance payments on-premises software customers make to SAP, rose 3% to $5.94 billion.

Total revenue for the quarter was up 2% to $6.9 billion, while operating profit grew 13% to $2.4 billion.

For the full year, revenue grew 4% to $22.86 billion, while operating profit rose 10% to $6.07 billion, SAP said.

SAP's co-CEOs hailed the results in a prepared statement.

"We are one of the few global tech companies that has successfully managed the transition to the cloud while growing our core business and improving our profitability at the same time," said Bill McDermott and Jim Hagemann Snabe . The latter will be stepping down this year.

Hana revenues served as "a major growth engine" in SAP's fiscal 2013, rising 69% to $903 million, the company said. Customers are "showing strong interest" in running their SAP Business Suite implementations on Hana, as well as on SAP's Hana-powered hosting service, according to the company.

SAP is hoping to convince customers that have long used Oracle's database underneath Business Suite to switch over to Hana, but must contend with a looming Oracle database upgrade cycle as well as an upcoming in-memory option for the rival product.

Databases serve as an anchor for applications vendors, given they can not only support the company's packaged products but also bespoke applications customers might build to fit a specialized business need, making the task of shifting to an alternative that much more difficult.

Friday's preliminary earnings announcement didn't mention any notable wins for Hana over Oracle's database, but more details could come with the finalized fourth-quarter and year-end results on Jan. 21.

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