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by Klaus Schachinger, Euro am Sonntag
F.For SAP, the impulse comes at the right time. A few weeks ago, competitor Oracle boasted of customers who had been stolen from the German competitor. It then recently leaked that the Alphabet subsidiary Google will replace Oracle’s financial software with programs from SAP within the next month. And while investors punished Oracle after a disappointing quarterly balance sheet, the DAX company is being rewarded for its performance during the first three months of the year on the stock exchange.
Incoming orders for subscription software from SAP, which is used in the cloud, increased more strongly in the first quarter than in five years, by 15 percent to 7.63 billion euros. Adjusted for currency effects, it is 19 percent plus. SAP is “right on course to achieve robust cloud growth,” said CEO Christian Klein. The DAX group from Walldorf south of Heidelberg in Baden-Württemberg raised its forecast for cloud sales in the current year at the lower end of the range by 100 million to 9.2 to 9.5 billion euros. This corresponds to an annual increase of between 14 and 18 percent.
The more predictable share of sales, cloud plus service, is expected to increase from 72 to 75 percent compared to the previous year. The increase in the forecast dispelled the greatest concerns among investors that SAP could delay its transition to becoming an influential provider of cloud software.
Investors react with relief
The share price rose strongly, also because of the solid balance sheet for the first quarter. Compared to the high-revenue and high-growth first quarter of 2020, revenue from subscription software rose by 13 percent to 2.15 billion euros. The revenues in the conventional business with software licenses increased by seven percent to 480 million euros. In the last quarter of 2020, they had collapsed by 30 percent surprisingly. Analysts now see the rise as a signal of stabilization.
However, negative currency effects are having a negative impact on sales and operating profit. In the first quarter, revenue shrank by three percent to 6.35 billion euros, and operating profit fell by almost a quarter to 1.74 billion euros. What pleased investors, however, is the significant increase in profitability. The operating margin climbed 4.9 percentage points to 27.4 percent.
Cloud software is expected to deliver around 40 percent of sales estimated at 23 billion euros in 2021. Boss Klein wants to achieve something similar to Microsoft’s leader Satya Nadella on the stock exchange for SAP. Investors should register SAP as a major cloud provider. That would result in significantly higher ratings. The potential for this is there: SAP has 400,000 customers. Of 16,000 companies that have indulged in S4 / Hana, the cloud version of SAP’s most important software ERP, only 2,000 use the program in the cloud.
Updraft: The preliminary quarterly figures push the course strongly. The technical hurdle at 110 Euro has been overcome. Attractive.
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