SAP reports revenue growth for Q2

US results boost overall figures; growth in other areas lesser

SAP reported a 15 percent year-on-year rise in earnings for the second quarter, on revenue that was up 12 percent. It forecast that underlying revenue growth in its core business of software and software-related services will accelerate following completion of its acquisition of Sybase.

Revenue totalled €2.89 billion, up 12 percent from €2.58 billion a year earlier. Net income for the quarter was €491 million, up 15 percent from €426 million a year earlier,

Revenue from consulting, training and other professional services remained flat at €617 million, but the company continues to derive most of its revenue from software and from software-related services, including support and subscriptions.

Support revenue grew 14 percent to €1.53 billion; software sales grew 17 percent to €637 million, and subscription and other software-related service revenue rose 30 percent to €95 million.

Overall, second-quarter revenue from SAP's core software and software-related services activities grew at 16 percent, or 8 percent excluding the effects of currency fluctuations.

Around the world, software revenue for the second quarter was up 64 percent in the Americas, SAP's biggest market, and up 11 percent in Asia, but down 9 percent in Europe, the Middle East and Africa.

All activities combined, SAP's second-quarter revenue rose just 3 percent in Europe, the Middle East and Africa, to €1.39 billion. Almost all that growth came from Germany, where revenue rose 9 percent to €506 million, from €463 million a year earlier. US revenue rose 21 percent to €802 million.

"We continue to see improvement in customer spending in most regions, as customers are returning to investing for growth," co-CEO Bill McDermott said in a conference call with journalists.

The company is signing an increasing number of large deals, McDermott said. Contracts worth over €5 million made up 20 percent of the company's order book in the second quarter, compared to just 12 percent a year earlier. Businesses in Europe have been the most cautious, showing a reluctance to sign such large deals, he said. Overall, the company has seen a 15 percent increase in its average selling price, he said.

SAP's other co-CEO, Jim Hagemann Snabe, put the emphasis on the company's smaller customers, saying that the key to success with small and medium-size enterprises (SMEs) is making software easier to purchase and cutting installation and integration times from months to weeks.

Back in 2005, the company set the goal of having 100,000 customers by 2010 — a goal the company reached during the second quarter, Snabe said.

"The release of the newest version of SAP Business ByDesign will further enhance our relevance and broaden our reach in the SME segment," he said.

In contrast to its traditional on-premise software, ByDesign is an on-demand product. Version 2.5 of ByDesign will go on sale in six countries on Friday, with a true "multi-tenancy" model and an interface based on Microsoft's Silverlight, he said.

"We have worked hard over the last year. We decided not to go to market before we had a perfect infrastructure. We have that now," he said.

Snabe ducked questions about the number of ByDesign customers SAP has signed up so far, saying only that there were thousands "in the sales pipeline."

SAP's acquisition of Sybase will allow it to strengthen the third pillar of its business, on-device applications, alongside its traditional on-premise and the more recent on-demand activities, Snabe said.

With the completion of SAP's tender offer for Sybase, the company is now working on integrating the two companies' portfolios and will outline its plans for the combined company on August 19.

Beyond SAP's sales figures, there is one other sign that the economy is picking up: its customers are paying faster. SAP's days sales outstanding, a measure of how long it takes customers to pay their bills, declined from 79 days on Dec. 31, 2009, to 73 days on June 30, 2010.

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