The SAP App Giant Rises in Q2
Published: August 8, 2011
by Jenny Thomas
SAP has had its struggles in recent years, but it is out to prove that you can't keep a software giant down. After being forced to cut thousands of jobs in 2009 due to the economic downturn, and spending years battling in court with competitor Oracle, SAP seems to be in the midst of an accelerated financial turnaround.
Citing strong customer demand for IT and particularly business software, and helped by new mobile solutions and data analytics technology, specifically SAP's new HANA in-memory acceleration appliance that we reported on back in May, SAP recently reported continued financial progress with its sixth consecutive quarter of double-digit growth in software and software-related service revenue when it released its numbers for the second quarter of 2011 in late July.
When compared to the second quarter of 2010, the reports for Q2 of 2011, ended in June, showed great gains. SAP's software license revenues rose by 26 percent, to €802 million; software and related services revenues increased by 14 percent to €2.6 billion. Total revenues at the German software giant were up 14 percent, to €3.3 billion. Total operating expenses rose by 15 percent, to €2.443 billion, and another €2 million in costs were added to the balance sheet for the litigation between Oracle and SAP over the defunct TomorrowNow third-party support business. Profit after taxes was up a whopping 20 percent (compared to just 4 percent in Q2 of 2010), to €588 million.
These financials follow a stellar Q1 for the German software giant, which ironically also saw a 26 percent increase in software license revenues to €583 million, as we reported here. Software and related services revenues had a greater gain in Q1 2011, increasing 20 percent to €2.33 billion. Total revenues also put up a bigger percentage increase in Q1 2011 (21 percent), but the actual amount of revenue increase was slightly greater in Q2, perhaps due to the fact that SAP reported a smaller increase of 9 percent between Q1 and Q2 in operating expenses.
Revenues also continued to improve by region in 2011. Software revenues in the EMEA hit €322 million in Q2, up 28 percent from Q1. The Americas showed promise, with sales up nearly 38 percent, to €318 million. Sales in the Asia/Pacific-Japan also took a good jump, up 61 percent to €163 million. When compared to 2011 Q1, in Q2 across all revenue types, SAP's sales in Germany were up by 20 percent, to €397 million, and the rest of EMEA gained a mere 7 percent, totaling €852 million. The United States also saw a small increase of 9 percent to €675 million, while the rest of the Americas region accounted for €230 million, up 8 percent. Japan brought in €137 million (up 10 percent), and the remainder of the Asia/Pacific-Japan region did €289 million (up 22 percent).
Jim Hagemann Snabe, co-CEO of SAP, spoke specifically about HANA in the Q2 call with Wall Street analysts. "HANA is truly changing the game in enterprise IT. We are already seeing a contribution of HANA to our top line results in Q2. The demand is strong worldwide. HANA has the fastest growing pipeline in SAP's history. At the end of Q2, the global pipeline [for HANA] exceeded €400 million."
"Our forecast essentially states that this will be the largest software year in the history of SAP AG," said Bill McDermott, the other co-CEO of SAP, on the same call.
SAP has lofty financial goals through 2025. The company is aiming to achieve at least €20 billion in annual revenue and 35 percent operating margins by the middle of this decade.
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