SAP Q2 revenue rises 14 percent

The results were buoyed by strong software sales

SAP's second-quarter revenues grew 14 percent, driven by strong software sales in all regions, the company reported Tuesday.

Based on IFRS (international financial reporting standards), revenues for the quarter ended June 30 were €3.3 billion (US$4.78 billion according to the exchange rate on the last day of the quarter).

Software revenue jumped 26 percent to €802 million ($1.16 billion), while software and software-related service revenue was €2.58 billion ($3.74 billion), a rise of 14 percent.

Profit after taxes for the quarter was €588 million ($853 million), a 20 percent jump. That outcome compared favorably to the first quarter, when after-tax profits rose 4 percent.

Earlier Tuesday, SAP updated its full-year financial guidance, saying that non-IFRS operating profits for fiscal 2011 will come in at the high end of the previously estimated range of €4.45 billion (US$6.45 billion) to €4.65 billion ($6.74 billion).

Overall, customers are responding to SAP's "magic" four-pillar strategy that involves its core business software plus mobility, advanced analytics and SaaS (software as a service), co-CEO Jim Hagemann Snabe said during a conference call Tuesday.

"Our innovation strategy is winning. We focused on innovation at the right time in the market," Snabe said, alluding in part to SAP's acquisition last year of Sybase, through which it gained an array of mobile software technologies. "Our customers are voting with their investments in these areas."

However, Snabe conceded that while SAP's newer initiatives have attracted the interest of customers, they aren't necessarily making a major impact on SAP's bottom line just yet.

Business ByDesign, its SaaS suite for smaller companies, now has 550 customers and is on track to meet a goal of 1,000 by year's end, Snabe said. But ByDesign will not add to profits this year, according to Snabe. "It's a long-term investment we're making to redefine the on-demand market."

Snabe did not give precise sales figures for the Sybase Unwired mobile platform or its HANA (high performance analytic appliance) in-memory computing engine, instead referring to a combined "pipeline" of leads that is valued at more than €400 million ($580 million).

Those products are in turn helping drive sales of SAP's core Business Suite, since they work in conjunction with data stored there, Snabe said.

There are now some 3,000 prospects in SAP's pipeline for mobility products, according to Snabe.

Overall, SAP's results reflect ongoing market trends, according to one observer.

"We're seeing more and more users finally upgrade to the ERP 6.0 product and moving to newer releases," said analyst Ray Wang, CEO of Constellation Research, via e-mail. "More importantly, BI and analytics is driving a lot of deals as companies transition from entering data to harvesting insight."

"Comparatively, SaaS vendors are growing faster," he added.

Meanwhile, the European debt crisis didn't put much of a damper on SAP's quarter, Snabe said. For one, Germany saw a 30 percent uptick in software revenues, a "remarkable" result given that Germany is SAP's most mature market, Snabe said.

But concerns loom over what global financial impact will occur if the U.S. defaults on its debt while lawmakers engage in a bitter partisan battle over the country's debt limit.

SAP believes that the IT industry, particularly software, will continue doing well no matter what happens, but hopefully U.S. officials will reach a consensus soon, Snabe said.

The company had originally planned to release its results on Wednesday, when executives are expected to discuss them further during a conference call.

Chris Kanaracus covers enterprise software and general technology breaking news for The IDG News Service. Chris's e-mail address is

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Chris Kanaracus

IDG News Service
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