SAP sees strong momentum for HANA and SuccessFactors business

Business software vendor SAP expects software and software-related service revenue to increase in the range of 10 to 12 per cent at constant currencies during the year, largely in line with preliminary estimates that the company released earlier this month. 

The forecast includes a contribution of up to 2 per centage points from SuccessFactors, the company it acquired in February.

SAP has also forecast operating profit of between €5.05 billion and €5.25 billion for the year, up from €4.71 billion in 2011.

For the quarter ended March 31, SAP reported on Wednesday that its revenue was €3.35 billion (US$4.5 billion as on the last day of the reporting period), according to International Financial Reporting Standards (IFRS), an increase of 11 per cent from the same quarter last year. But operating profit grew only 6 per cent, indicating a pressure on margins. IFRS profit after tax was up 10 per cent to €444 million. The figures exclude the effects of certain acquisitions and of currency fluctuations.

The revenue and profit figures for the first quarter include those from SuccessFactors starting on February 21, 2012, which were not included in the prior year period.

SAP said it saw strong momentum from its in-memory platform SAP HANA, cloud and mobile solutions, and core applications and analytics products. The SuccessFactors business achieved a 69 per cent increase in its 12 month billings from new business in the first quarter, in comparison to its first quarter 2011, the company said.

The company’s software revenue was up 4 per cent to €637 million in the first quarter while software and software-related service revenue grew by 13 per cent over the same quarter last year to €2.62 billion.

SAP expects the momentum in its business to continue through the second quarter with software revenue expected to grow by 15 to 20 per cent in constant currencies, and software and software-related service revenue to grow by 14 to 16 per cent.

During a conference call on Wednesday, SAP noted that what it called “execution issues” had dampened North American sales, reiterating a point officials made in its preliminary financial report issued April 13. However, co-CEO Bill McDermott, speaking on the call, emphasized that SAP is back on track in North America. 

“The disruption is over, the pipeline is strong and we have the right leaders,” McDermott said, adding that the disruption only existed on the leadership level. 

To focus on growth and innovation, the company added Lars Dalgaard and Robert Enslin to its new Global Management Board on April 20.

During the call, McDermott also addressed a slow start of sales in parts of Europe. While Germany, Austria and the Nordic countries performed very well, driven by the automotive, banking and retail industries, other parts of Europe lagged, relative to last year, “due to a very strong 2011,’ he said. He expected sales to pick up during the rest of the year. 

SAP expects to more than double its business in the in-memory HANA platform this year. “It is just a question of how much more than double we will do,” McDermott said, adding that the HANA deals that didn’t happen before are occurring now. He had no doubt that SAP can convert more than 1,000 customers to the HANA platform, saying that number will be “eclipsed.” 

In early morning trading on the New York Stock Exchange, SAP shares rose $0.72 to $65.87.

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Jim Love, Chief Content Officer, IT World Canada

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