SAP's logo is seen in this file image. Photo: Uwe Anspach/AFP SAP's logo is seen in this file image. Photo: Uwe Anspach/AFP
Walldorf - SAP sees “robust” demand for its latest flagship software and CEO Bill McDermott said the business-software maker still has an opportunity to beat its full-year profit forecast.
For the year, SAP expects operating profit of 5.6 billion euros ($6.3 billion) to 5.9 billion euros, excluding currency fluctuations, and software license, support and cloud subscription revenue to grow by 10 percent from last year’s 14.3 billion euros.
“We’re feeling very good about our business,” McDermott said Tuesday on a call with reporters, adding the 2015 forecast is heavily dependent on groundwork in the current fourth quarter. “The reason we didn’t raise it is it’s an annual guidance and the biggest part of the annual operating plan is still to be determined. We still have a chance to outrun it.”
SAP shares rose 0.3 percent in Frankfurt at 9:08 a.m., giving the company a market value of 81.5 billion euros.
Walldorf, Germany-based SAP is relying on a major update to its traditional finance and manufacturing software to entice customers to stick with the company in their data centers, while it’s renting them new online capabilities for customer analysis and human resources. More than 1 300 businesses are running S/4 Hana, a new version of SAP’s core suite released earlier this year.
That’s helping SAP outpace rivals including Oracle and International Business Machines. SAP posted 4 percent growth in sales of new software licenses to 1.02 billion euros, besting Oracle, whose license sales fell 9 percent in constant currencies for the quarter ended August 31. IBM on Monday lowered its full-year profit forecast and said it’s seeing an "elongated" sales cycle for software and other products.
SAP’s third-quarter report confirmed preliminary figures released Oct. 13 that showed adjusted revenue rose 17 percent to 4.99 billion euros. Adjusted operating profit jumped 19 percent to 1.62 billion euros. Both sales and profit beat analysts’ estimates.
SAP also got a boost in the quarter from a weaker euro as the company translates overseas sales into its home currency. Chief Financial Officer Luka Mucic added that markets including Brazil, Russia and China are exhibiting weakness, which is checking growth.
Eliminating jobs
SAP is eliminating jobs faster than it expected as some employees continue to sign up for voluntary severance. Mucic said he now expects about 3 000 employees to leave the company by the end of the year as part of a plan announced in March, compared with an earlier estimate of about 2 200.
The company expects to save more than 500 million euros on an annualized basis from the job cutting program, Mucic said, even as SAP makes a push to hire younger workers.
McDermott reiterated his commitment to SAP in the aftermath of a severe household accident over the summer that caused the loss of an eye last month. He said he called SAP’s chairman from the hospital to reaffirm his desire to serve, but added that SAP has "fantastic executives" who could step in if a succession plan was ever needed in the future.
"I spent a week in an intensive care unit and the first call I made was to Hasso Plattner and the supervisory board," McDermott said. "There’s no place I’d rather be than SAP. I want it more than I’ve ever wanted it before."
BLOOMBERG