SAP Boosts Sales and Profits in the Third Quarter

October 29, 2007 Timothy Prickett Morgan

Enterprise application software giant SAP reported its financial results for the third quarter of 2007 last week, and revenues, earnings, and earnings per share grew in the double digits for the company. SAP’s recent decision to offer software as a service through its Business ByDesign product, which is not going to be ready for primetime for a while, did not put a damper on perpetual software license sales.

In the third quarter, SAP booked total sales of 2.42 billion euros, up 9 percent as reported and up 13 percent at constant currency. Software license sales in the quarter grew by 11 percent to 715 million euros (up 15 percent at constant currency), while support revenues from SAP’s monstrous 41,200-strong customer base continues to be the biggest source of sales, with 978 million euros in the third quarter, up 13 percent (16 percent at constant currency). SAP had 46 million in software subscription sales in Q3, up 28 percent (31 percent at constant currency), and this is just the tip of the Business ByDesign iceberg that SAP has planted its flag upon to stake its claim to the SaaS market. The company had 544 million euros in consulting sales in the quarter, up only 1 percent, and training sales of 102 million euros, up 12 percent. Combined services sales came to 674 million euros, up 3 percent. SAP exited the quarter with 1.6 billion euros in cash and equivalents and 962 million euros in short-term investments.

Those numbers are important mainly because SAP is in the middle of a $6.7 billion takeover of French business intelligence software maker Business Objects, which has more than 44,000 customers worldwide and which was a pioneer in the BI field. By buying Business Objects and launching the Business ByDesign suite, SAP can probably more easily hit its target of more than 100,000 customers by 2010. Deutsche Bank has given SAP a 5 billion euro credit line to do the deal, and the company just extended its friendly takeover offer for Business Objects until January 18, giving time for the European Commission regulators to approve the deal. Which they almost certainly will, since having a French company taken over by a German one is infinitely better, from a European point of view, than having Larry Ellison and Oracle sweep in and take over.

Of course, Oracle has its own problems this week, since BEA Systems has rejected Oracle’s $6.7 billion hostile bid from a few weeks ago, saying last Thursday that the number to start the merger discussions is more like $8.3 billion.

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