SAP 3rd Quarter Results

SAP posted yet another quarter of poor results as a result of the difficult market environment.

While new license software continued its dive (-31%), it is no surprise that maintenance fees saved the day, growing by 14% to 1.3 billion euro. The company also improved its margin by to basis points to 24.2% under this situation. For more on maintenance fees and stock valuations, please my recent discussion on whether shareholders and customers may be at odds on this point.

More telling for me than new licenses are the results for SAP consulting and training. Given the amount of licenses floating on the market, and projects on hold tied to pre-existing licenses, I would suspect that consulting revenues should be the first part of the business to improve. However revenues from this segment declined a very steep 22%. Also of note is the 43% decline in training, which really indicates to me the continued lack of hiring going on within the SAP customer base.

By geography, APAC seems surprisingly weak, declined by -11% excluding Japan which was flat.
The U.S. at -6% performed "better" than Germany (-11%) and rest of EMEA (-7%), which may be due to some stimulus effect on the overall economy, as well as what seems like the priority market for cross-selling Business Objects into the SAP install base.

Having just attended SAP's "World Tour" show in NYC just last week, it does seem clear that SAP expects the market to come back and is hitting hard around Business Objects, Business Suite 7 Upgrades, as well as newer offerings such as sustainability. While the audience was a little heavy on the SAP sales people, those customers/prospects who were there do seem a bit more upbeat based on my conversations. Particularly around front-end, short-term investments in BI, since this can deliver the biggest bang for the buck, and no rip-and-replace is needed typically.