SAP’s Q2 Bottom Line Pinched By Potential Lawsuit Charges

July 28, 2014 Timothy Prickett Morgan

Hot on the heels of Germany’s victory in the World Cup soccer tournament, software giant SAP is extolling the benefits of the HANA in-memory technology that the German team used to analyze its own players as well as do competitive analysis on its opponents before, during, and after matches. “When you think about what they accomplish with their smart use of big data, it amounts to making a complex game look simple,” explained co-CEO Bill McDermott in a conference call with Wall Street analysts going over SAP’s second quarter financial results. “And now we know that simple helps win the World Cup.”

As you might expect, the HANA in-memory database and its adjunct programming tools are what SAP wants to talk about these days, alongside its prowess in cloud computing. Sometimes it talks about both at the same time. But SAP is still largely a supplier of application software that is licensed by customers to run on relational databases, even if there are plenty of HANA and cloud customers in the SAP fold.

McDermott said on the call that there are over 1,500 startups who are building applications atop the HANA database, and that there are now over 1,200 customers who are running SAP’s Business Suite applications on top of HANA in production. SAP itself runs atop a fairly modest HANA setup, which I have reported on at my other job at EnterpriseTech. You would probably be surprised at how little iron it takes to run SAP, and that it all runs in memory. All told, SAP has more than 3,600 customers using HANA. SAP is no longer reporting revenue figures for HANA, which is unfortunate.

In the period ending in June, SAP posted sales of €4.15 billion, up 2 percent. Cloud subscriptions and related support accounted for €241 million of that, up 52 percent, while software licenses accounted for €957 million, down two points from the year-ago period. Support revenues came to €2.28 billion, up 5 percent. Because of ongoing investments in building out its own cloud services–particularly ones that run HANA–and other research, development, sales, and marketing expenses, operating profits fell by 29 percent to €698 million. The profits were also hit by a €289 million charge to cover potential costs in a patent lawsuit with Versata Software, which sued SAP a few years ago. The U.S. Supreme Court turned away an appeal filed by SAP relating to the suit back in January.

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