SAP sees growth but falls short of user and analyst expectations

SAP sees growth but falls short of user and analyst expectations

SAP sees revenue increase by 12% in its second quarter figures, but falls short of analyst expectations, while SAP customers voice their disappointment at the software giant's SaaS rollout.

SAP suffered double disappointment this week as it failed to hit analysts' expectations with its second quarter figures, and it received a ticking off from the SAP User Group for the slow progress of its SaaS suite.

The enterprise software giant saw revenues increase by 12% to nearly E2.9 billion in the three months to 30 June, on net profits that jumped 15% to E491 million or $0.41 per share. But analysts polled by Dow Jones newswires had expected net income to be more like E525 million and sales to be around E2.75 billion.

Currency impacts in South East Asia and severance paid to former chief executive Leo Apotheker and former management board member John Schwartz were blamed for the shortfall.

Werner Brandt, SAP’s chief financial officer, said: "The top line results were driven by continued growth in software revenue, strong support revenue, mainly from the majority of our customers who endorsed Enterprise Support, and double-digit growth in subscription revenue."

The vendor saw software sales jump by 17% to E637 million, while software and software-related service revenues rose by 16% to E2.26 billion.

Taking into account its $5.8 billion acquisition of Sybase - the cash tender offer for all outstanding common stock of which was completed today - SAP said that it expects non-IFRS software and software-related service revenue to increase by between 9% and 11% for the full fiscal year 2010, with SAP’s existing business predicted to account for between 6% and 8% of that. The segment generated E8.2 billion last year.

Meanwhile, new research of SAP customers has revealed that nearly three-quarters of users believe that the enterprise applications vendor has been slow to adopt a software-as-a-service delivery model - with 16% turning to third-party SaaS providers as a result.

The findings, the result of a survey of 100 members of the UK & Ireland SAP User Group, also reveal that just over three out of five customers said that they expected to use the vendor’s SaaS offerings in future, while 55% believed that the delivery model could make it easier to set and meet service level agreements than by retaining software in-house.

Craig Dale, chief executive of the User Group, said: "It’s clear that more users are now starting to consider SaaS as a way to deliver applications to their business. Rightly or wrongly, SAP has been criticised for being slow to bring its SaaS offering to the market, but hopefully the result is a more robust and compelling offering."

The research demonstrated that, although only 17% of respondents were using SaaS to access their business-critical applications today, just under half planned to do so over the next 12 to 18 months, with the key reasons for such a move related to the potential for reduced costs (35% of those questioned) and quicker deployment times (32%).

However, Tim Noble, managing director of SAP UK & Ireland, defended the company's speed of launch. "We truly believe we came to the marketplace early enough with SAP Business ByDesign," he said. "Innovation is more than just having great ideas and developing nice software. Innovation is only innovation when it is also implemented at the customer and being used productively. This is why we have been working with pilot customers until now to ensure the solution is robust and ready for volume business."

The User Group research did also highlight some concerns about SaaS adoption, however, with some respondents reporting fears over compliance and data protection issues (34%), as well as loss of control (26%). A further 20% were concerned by the lack of customisation options provided by such offerings, while the same number worried about the possibility of network and server outages.

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