Cloud, mobile, HANA help SAP boost Q2 revenue
Margins were however hit by the SuccessFactor acquisition, severance expenses, and new hires
IDG News Service - SAP's revenue for the second quarter grew 18 percent over the same quarter last year to AA!3.9 billion (US$4.9 billion) following record software revenue of over AA!1 billion, it reported on Tuesday.
The business software company in Walldorf, Germany, said all regions posted double-digit software revenue gains, while demand for SAP's new offerings continued to grow.
SAP said it benefited in the cloud market from its February acquisition of cloud software company SuccessFactors, leading to a 112 percent increase year-on-year in 12 month new and upsell subscription billings for SuccessFactors on a stand-alone basis. Cloud revenue was AA!69 million in the quarter.
The company said it recorded AA!85 million in business from its in-memory platform HANA in the quarter, putting it on track to meet its forecast of at least AA!320 million for the year. Some 100 companies are now live on HANA, which became generally available about a year ago, and 500 have purchased it, according to SAP.
Mobile revenue was AA!54 million against a target of AA!220 million for the year.
In line with preliminary estimates released earlier this month, SAP said its software revenue according to international financial reporting standards (IFRS) was about AA!1.06 billion, up by 26 percent from the same quarter last year, while software and software-related service revenue was up 21 percent to AA!3.12 billion.
The second quarter figures include revenue, profit and cash flows from SuccessFactors which were not included in the second quarter last year.
Net profit was AA!661 million up 12 percent from a year ago.
The company said it had reached the upper end of its second quarter software revenue guidance range and was at the mid-point of the guidance range for software and software-related service revenue.
Operating margins were however down at 23.6 percent from 26 percent a year earlier, because of severance expenses, the acquisition of SuccessFactors, and an increase in headcount.
The company had 60,972 employees at the end of the quarter, up by 13 percent from the same quarter last year. Some of these came from acquisitions.
SAP has forecast full-year 2012 non-IFRS software and software-related service revenue to increase in the range of 10 to 12 percent at constant currencies, which includes a contribution of up to 2 percentage points from the SuccessFactors' business.
The company expects full-year 2012 non-IFRS operating profit to be in the range of AA!5.05 billion to AA!5.25 billion at constant currencies, which is expected to be in a similar range if SuccessFactors is excluded.
SAP said it was on track to achieve its 2015 goals, which includes a revenue target of AA!20 billion.
This was SAP's "best-ever" second quarter, co-CEO Bill McDermott said during a conference call Tuesday. It's also SAP's 10th consecutive quarter of double-digit growth in software and software-related services, he said.
Growth was strong throughout the world, including Europe, according to McDermott. SAP added 2,000 "net new" customers in Europe, the Middle East and Africa, including many small and medium-sized businesses, he said.
That performance means SAP grew twice as fast in EMEA as its "nearest competitor," McDermott claimed, in an apparent allusion to Oracle.
He also named some key customer wins, including the Crocs shoe company and the National Basketball Association. The latter bought analytics software from SAP that will help it win "the game behind the game," McDermott said.
Through a mix of acquisitions and internal product development, SAP in recent years has oriented its strategy around a number of areas, including mobile applications and cloud-based software.
"IT landscapes are transforming radically," and SAP's product strategies are meeting customers where they're already going, co-CEO Jim Hagemann Snabe said during the call.
SAP's Rapid Deployment Solutions -- sets of preconfigured software and services -- are finding success, Snabe said. About 1,000 customers have bought RDS packages since their introduction in 2010, with more than half of those sold in the first two quarters of this year, according to Snabe.
The vendor has apparently also moved well beyond the past controversy over its Enterprise Support service. Introduced in 2008, the service added new features but also raised the cost of customers' annual support fees.
SAP made a number of concessions after an outcry from its user base, including the restoration of a basic support option. But today, 96 percent of customers are choosing Enterprise Support, CFO Werner Brandt said during the call.
The company has plenty to keep it busy through the rest of this fiscal year. For one, SAP's cloud software strategy can't come into full focus until it completes the recently announced acquisition of Ariba. That deal is still under scrutiny by regulatory agencies and it's not clear when it will close.
These regulatory hurdles are "quite normal," Brandt said. "At the end of the day we assume we'll get the green light in the fourth quarter."
Meanwhile, SAP is also seeking to position HANA not just as the future convergence point for all its technologies, but also as an application development platform.
That will be the focus of discussion at SAP's upcoming Tech Ed conference in October, executive board member and technology chief Vishal Sikka said in an interview.
While HANA continues maturing, SAP has positioned the Sybase ASE database as an option for customers now running rival databases such as Oracle underneath SAP Business Suite.
Sikka also reaffirmed that HANA will support the company's core Business Suite ERP application modules by the end of this year.
Oracle will undoubtedly make strong defensive moves against SAP if HANA or ASE begin making serious inroads to its database business.
In addition, Oracle is planning to release a long-awaited new edition of its database around the turn of the year, according to CEO Larry Ellison. That timing may present a more difficult decision for customers running Oracle, who in any event would have to choose between upgrading a familiar technology or replacing it wholesale.
SAP is ready to compete with Oracle's next-generation database, which is expected to be called 12c, with the "c" standing for cloud.
"They can bring it on, and we'll see," Sikka said.
- 15 Non-Certified IT Skills Growing in Demand
- How 19 Tech Titans Target Healthcare
- Twitter Suffering From Growing Pains (and Facebook Comparisons)
- Agile Comes to Data Integration
- Slideshow: 7 security mistakes people make with their mobile device
- iOS vs. Android: Which is more secure?
- 11 sure signs you've been hacked
- What Datapipe customers need to know about the new PCI DSS 3.0 compliance standard This handy quick reference outlines what PCI DSS 3.0 is, who needs to be compliant and how Alert Logic solutions address the new...
- The 12 PCI DSS 3.0 requirements addressed by Peer 1 Hosting This handy quick reference outlines the 12 PCI DSS 3.0 requirements, who needs to be compliant and how Alert Logic solutions address the...
- Defense Throughout the Vulnerability Life Cycle This whitepaper provides insight into how to leverage threat and log management technologies to protect your IT assets throughout their vulnerability life cycle.
- The Critical Role of Support in Your Enterprise Mobility Management Strategy Most business leaders underestimate the importance of tech support when they choose an EMM solution. Here's what to put on your checklist.
- Live Webcast Best Practices for the Hyperconverged Enterprise Network To the Age of Constant Connectivity and Information overload
- Live Webcast Unmasking the Differences between Consumer and Enterprise File Sync & Share The consumerization of IT combined with the rapid pace of the modern mobile workplace is forcing enterprise IT teams to evaluate file sync...
- Live Webcast Government Agency Webifies Outdated COBOL Applications Let this CTO tell you how his agency converted 1980s-era green screens into an e-filing portal for the 100,000 cases handled each year...
- The New Way to Work Knowledge Vault This Knowledge Vault focuses on how, in today's increasingly virtual world, it's more important than ever to engage deeply with employees, suppliers, partners,...
- Getting Ready for BlackBerry Enterprise Service 10.2 Find out how BlackBerry® Enterprise Service 10 helps organizations address the full spectrum of EMM challenges, while balancing the needs of both the... All Applications White Papers | Webcasts