SAP Outperforms Oracle With Steady Financial Results

SAP reports 13th consecutive quarter of double-digit growth as core applications lag but sales of Hana, cloud and mobile grow.
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SAP reported good, but not great, financial results on Friday, posting a modest 5% gain in new software revenue contrasted with a 25% gain in overall software and cloud subscription revenue. The bright spots in the first quarter ended in March included healthy gains in Hana database, cloud subscription and mobile growth while sales of on-premises software and results in the Asia-Pacific region disappointed.

Despite the uneven performance, SAP reported its 13th consecutive quarter of double-digit growth, with software and software-related services revenue increasing 14% to 2.94 billion euros ($3.86 billion) compared to the same quarter last year (all figures are non-IRFS in constant currencies).

The performance outpaced that of SAP's biggest rival, Oracle, a point that SAP co-CEO Bill McDermott drove home several times during a conference call with financial analysts.

"We gained significant market share from our primary competitor, especially in the areas of cloud and database," McDermott said. "Our 25% software and cloud subscription growth is a stark contrast to [Oracle, which] did not grow at all in its latest quarter." Oracle reported a 2% drop in software license and subscription revenue in its third fiscal quarter ended in February.

[ Want to compare and contrast SAP's performance with Oracle's? Read Oracle's Bad Quarter Is Self-Inflicted. ]

SAP's software license sales grew 8% in the Americas to 254 million euros ($333 million), but McDermott acknowledged that the performance was lower than expected. Federal budget sequestration had a negative impact on sales to government and overall results in the U.S., McDermott said.

In the Asia-Pacific region, where software sales declined 15% to 105 million euros ($137 million), McDermott cited slower sales in China, where a change in the national government slowed sales to state-owned businesses -- a sales trend also reported by IBM on Thursday.

Accelerated by last year's acquisitions of SuccessFactors and Ariba, SAP cloud subscription and support revenue increased 380% to 167 million euros ($218 million). Total cloud subscription, support and services revenues were up 5% over the fourth quarter of 2012 to 224 million euros ($293 million) and are on track to reach $900 million euros ($1.17 billion) by year end, according to SAP.

Hana database software revenue tripled to 86 million euros ($112 million) in what is historically SAP's smallest quarter. The company predicted that accelerating sales would lift total Hana revenue to 650 to 700 million euros ($852 to $917 million) this year. SAP highlighted Hana adopters including oil giant Petrobras of Mexico, Levi Strauss, ConAgra and Siemens Bosch.

SAP's mobile infrastructure and application sales increased 76%, and together with cloud and Hana sales, these areas of innovation are driving renewal of SAP's core applications, according to co-CEO Jim Hagemann-Snabe.

"The beauty of our strategy is that the core gets pulled [along] by the innovations," Snabe explained. "Mobile makes core applications easier to consume and Hana makes the core significantly more competitive, and with that we'll get more users."

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