Sunday, April 22, 2007

SAP's Profit Just Misses Views, As Firm Says Market Share Rose

J. Bonasia Fri Apr 20, 7:00 PM ET

Overshadowed of late by some huge acquisitions by archrival Oracle, business software leader SAP on Friday reminded the marketplace that it remains a force.

SAP (NYSE:SAP - News) said earnings, minus one-time charges, rose 9.9% to 310 million euros ($421 million) from 282 million euros in the year-ago quarter. Analysts were expecting 309 million euros.

Per-share profit rose to 0.26 euros (35 cents) from 0.23 euros. U.S. figures use Friday's conversion rates.

It said revenue rose 6% to 2.17 billion euros ($2.99 billion) from 2.04 billion euros, a bit above views.

SAP's American depositary receipts rose 2.5% Friday to a three-month high of 50.39.

"It was a very good start into 2007," SAP Chief Executive Henning Kagermann said in an interview Friday from Walldorf, Germany. "All regions performed well."

SAP said its share of the business applications software market, which it said totaled $34.8 billion in 2006, rose to 25.1% over the past four quarters, from 24.5%.

The German software maker is locked in a pitched battle to sustain market leadership over Oracle (NasdaqGS:ORCL - News). Since January 2005, Oracle has spent more than $20 billion on acquisitions to expand its line of applications software.

For the quarter, SAP said it boosted its total software license revenue -- a key indicator of future growth -- by 10%, to 563 million euros ($766 million).

But Oracle reported license growth of 16% in its quarter ended Feb. 28. It's hard for investors to assess which company actually is taking share from the other, says Brendan Barnicle, a Pacific Crest Securities analyst.

"That's how this debate goes, on and on," said Barnicle, who rates SAP as sector perform, or neutral.

The rivalry took another turn last month, when Oracle filed suit charging that an SAP unit had committed corporate fraud by downloading software and other files from Oracle servers without authorization. SAP has denied any wrongdoing.

SAP said license revenue for North America rose 11% to 249 million euros ($338.6 million).

"This quarter highlights continued strength for SAP in the U.S.," said Ross MacMillan, an analyst with Jefferies & Co. "The question is: What is the sustainability of that strength?"

In a conference call with analysts, SAP Deputy Chief Executive Leo Apotheker said he "didn't see any material change" in the U.S. spending environment. "It was as expected -- not better, not worse," he said. "And we have no reason to believe that that will change."

Last week, IBM, EMC and Seagate all said U.S. tech spending was a bit soft.

Management also reaffirmed its plan to invest 300 million to 400 million euros ($408 million to $544 million) over the next two years to boost sales to midsize companies. SAP has launched a big ad campaign in North America targeting the midmarket.

SAP is investing to build a team for sales and support to serve this market. It's also spending on data centers to host new on-demand software for customers. "The revenue will come later, but we have to pay the cost at the beginning," Kagermann said.

Those investments should shave one or two percentage points off SAP's operating profit margin this year, says Laura Lederman, a William Blair & Co. analyst.

"It is unclear at this point 14 time if SAP's middle-market efforts will be successful," Lederman wrote in a note to investors. She rates the stock as market perform, or neutral.

Some fear midsize companies will need more technical support from SAP than large enterprises. "Serving the midmarket is a dramatically different business," he said.

Improved sales boost SAP's quarterly profit nearly 10%

By Linda Loyd
Inquirer Staff Writer
SAP AG said yesterday that its first-quarter profit rose nearly 10 percent on improved sales, and the maker of business software vowed not to settle a lawsuit filed against it last month by rival Oracle Corp.

Germany-based SAP, which has a headquarters for the Americas in Newtown Square, said net income rose 9.9 percent to 310 million euros ($421.5 million), or 0.26 euros a share, in line with analyst expectations. That compared with 282 million euros, or 0.23 euros a share, a year earlier.

Revenue was up 6 percent to 2.2 billion euros ($2.99 billion) for the quarter from 2 billion euros in the first quarter of 2006. Analysts polled by Thomson Financial were expecting quarterly revenue of 2.2 billion euros.

Henning Kagermann, SAP's chief executive officer, said management was pleased with financial results. "On a constant-currency basis, we achieved a strong increase in software and software-related service revenues, and reported double-digit growth rates for each region," he said. The regions include Europe, the Americas (including the United States), and Asia-Pacific.

SAP said it continued to gain share in the $38 billion business-software market to 25.1 percent in the quarter ended March 31, up from 24.5 percent in the fourth quarter of 2006.

Bill McDermott, president and CEO of SAP Americas Inc. in Newtown Square, said software revenue was up 22 percent in the Americas, and 24 percent in the United States. "It was a very nice quarter," he said.

He predicted that demand for SAP's products would increase as companies grew and competed "more and more in a global economy" and standardized the management of their business on a software platform - everything from payroll to client orders, the supply chain to handling customers.

SAP is locked in a fierce rivalry and competition for customers with Oracle, of Redwood City, Calif.

During a conference call with analysts, Kagermann said SAP would vigorously defend itself in the coming weeks against Oracle's lawsuit, filed March 22, which accuses SAP of "corporate theft on a grand scale" and of stealing its software. Kagermann said SAP has no intention of settling.

Kagermann said SAP had a long legacy and "unparalleled reputation as a trusted adviser and a highly regarded partner." The company, he continued, "believes in the importance of intellectual-property rights, and we will aggressively defend against the claims made in this lawsuit."

He said the company would make a formal response in court in San Francisco to Oracle's allegations that employees of SAP's TomorrowNow Inc. subsidiary used log-in credentials of Oracle customers to access documents and software that Oracle uses to provide support services for its customers.

Kagermann said that "SAP and TomorrowNow are actively engaged in legitimate competition" and that "TomorrowNow's business success is all about customer choice. This lawsuit demonstrates that Oracle is trying to limit customer choices by trying to discredit the competition."

McDermott said: "We have a great brand. We respect other people's intellectual property, and we expect them to respect our intellectual property. We are a good partner, and our reputation is rock-solid. And we will, in the coming days, vigorously respond to this allegation, and the strength of our response will be clear and decisive."

SAP shares closed up $1.21, or 2.46 percent, at $50.39 on the New York Stock Exchange.

SAP Brings Good Q1 News to Sapphire

By Renee Boucher Ferguson
April 20, 2007

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SAP reported its first quarter 2007 earnings April 20, highlighting a jump in profits. Net income for the quarter was $413 million, up from $282 million a year ago, and total revenue jumped 6 percent to $295 billion, in what turns out to be an auspicious start following a tumultuous period for the giant software company.

Not only did SAP's earnings come in below expectations in its second and fourth quarters of 2006, but the company's CEO heir apparent and resident visionary Shai Agassi resigned last month (effective April 1), about the same time that its biggest competitor, Oracle, slapped the company with a lawsuit.

Henning Kagermann, SAP's CEO and new head of products in Agassi's stead, set the record straight during the April 20 earnings call with analysts and press, particularly regarding SAP's ongoing battle with Oracle.

"We have no intention to settle; why should we?" Kagermann said. "We don't think anything is wrong in our company. We have a long legacy at the company, with an unparalleled reputation as a trusted advisor and a trusted partner."

Oracle is suing SAP for what it deems thievery on a grand scale, contending that SAP's subsidiary TomorrowNow improperly accessed thousands of support documents from, using customer log-ins. TomorrowNow provides third-party support for Oracle's Siebel, PeopleSoft and JD Edwards applications.
"We believe in the importance of intellectual property rights and we will aggressively defend against the claims made in the lawsuit," Kagermann said. "However, this lawsuit is still in its early stages and we will formally respond to these claims within the next weeks."

The earnings report leaves SAP, headquartered in Walldorf, Germany, in a good position for its annual Sapphire user event, to be held in Atlanta April 22-25. While it's unclear what SAP will be announcing at the event, one thing is certain, according to Bill Wohl, SAP's vice president and head of Product Technology Group Communications: "We're not going to spend a lot of time talking about Oracle," he said. "They spend a lot of time talking about us. We're talking to customers.
Three key themes are expected to be stressed at the event: SAP's Enterprise Services Architecture road map; the level of activity and co-innovation from SAP's partner community; and an evolution of the chief financial officer's role in an organization, which has led to the need for corporate performance management software, according to Wohl.

Of those three, the biggest news is likely that SAP's ESA road map, begun in 2003, is largely complete—a message Kagermann will likely drive home in his keynote address.

It's also rumored that SAP will announce one or two smaller technology acquisitions.

Wohl said SAP will also not spend a lot of time talking about Agassi's departure, given the company's initial and frank discussion of why Agassi decided to leave in the first place (he didn't want to wait two years to be named CEO and then invest another five years in a co-leader role, which SAP officers had proposed).

Rod Masney, president of ASUG (Americas' SAP Users' Group), said there is a hole to fill given Agassi's departure.

"Our user community saw Shai as a great visionary for technology. The technology group … that was his crowd; he could talk technology. God is the wrong word, but certainly he was looked on as a sage," Masney said. "The audience was always mesmerized by what he had to say."

But, Masney said, Agassi built a great team, with at least four members stepping up to fill different aspects of Agassi's role.

"Those guys are still there," Masney said.

Speaking for ASUG's users, Masney said they have one overriding concern: upgrades, upgrades, upgrades.

Masney said ASUG's members want to hear from SAP about MySAP ERP 2005, its latest—and core—release for SOA (service-oriented architecture)-enabled ERP (enterprise resource planning). "They want to hear what the features, functions and enhanced upgrade process are. What they want to hear from other companies is that they have lived through the upgrade process, and what their best practices are—[and] what are the stupid things they've done and wished they would never make that mistake to do again."

Masney said ASUG members plan to share that information at its conference, which is also to be held April 22-25, co-located for the second year with Sapphire.


By Shamus McGillicuddy, News Writer
04.18.2007 |

When business intelligence software projects fail, IT is often blamed. But the failure can usually be traced to lack of leadership, not technology.

In fact, a new survey finds that a lack of ownership by the right executive often leads to a disconnect between the vision of senior management and the way a project gets done.

[Business intelligence] definitely can't be an IT project. I don't think it has much value without the business.
Michael Carper
divisional vice president of technology operations, Coldwater Creek Inc.

"The core issue with business intelligence [not succeeding] isn't a technical issue," said Betsy Burton, vice president and distinguished analyst at Stamford, Conn.-based Gartner Inc. Rather, she said, it's the failure on the part of business leaders to make sure the organization gets the information it needs and leverages it in a way that makes sense with the business objectives.

"It's interesting," Burton said. "The symptom that people see is a lack of vision, a lack of strategy, a lack of linking supportive business intelligence back to systems. It's very easy for managers to say, 'Hey the data is wrong,' rather than take an introspective look. They should ask 'Have I given the organization a clear sense of what we're trying to get out of business intelligence? Am I really arming my people within my organization with a sense of the importance and the metrics so that they can deliver valuable information?' It's easier to point at the numbers and say, 'The numbers are wrong. Fix them.'"

Burton, who surveyed 350 organizations about their business intelligence projects, found that only 10% reported their projects had a C-level executive sponsor with a direct link to the business. Twenty-five percent said their projects were sponsored by an IT manager, and 25% had no executive sponsor at all.

What raised the red flag for Burton, however, was that 40% of those polled said their business intelligence projects were owned by lower-level business executives. That isn't ideal, Burton said, because that group tends to have tactical rather than strategic roles -- which is what ends up sinking a project.

Even more alarming is that 65% of those polled said they viewed business intelligence technology as too complex and unusable and 69% said they lacked the skills necessary to use it anyway.

Few can argue that businesses are sold on the virtues of business intelligence. It's one of the fastest-growing sectors of the IT software market, according to Framingham, Mass-based research firm IDC. Further, the business analytics market accounted for $18.25 million in global revenue in 2006, and is forecast to grow about 10% a year during the next five years.

Experts contend that for many organizations a business intelligence initiative is a business project that's been dumped on the laps of IT and lower-level executives who haven't been keyed into the vision, and, worse, aren't expected to look at the data analytically. Ultimately, the project fails.

But some companies can point to business intelligence as being pivotal to its success. Coldwater Creek Inc., for instance, a clothing cataloger and retailer catering to professional women, is one of the nation's fastest-growing retailers. The Sandpoint, Idaho-based company, which was founded in 1984 and has 239 stores nationwide, is expected to see sales of $1.24 billion this year. In 2006, retail store sales increased 46.1%, surpassing a $1 billion sales mark milestone for the company.

Part of the company's success is attributed to its business intelligence initiatives. According to Michael Carper, the clothier's divisional vice president of technology operations, CEO and founder Dennis Pence has a vested interest in Coldwater Creek's business intelligence implementations.

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"I think he had a pretty good idea of where he wanted to start and where he wanted to see it go in the early stages," Carper said.

Coldwater Creek uses business intelligence to determine where to build retail stores -- including the 65 new stores it expects to open this year, Carper added. It also analyzes what products are selling well and in which regions of the country. His company has a lot of data to look at, given that it sends out 140 million catalogs a year. Coldwater Creek has collected a lot of data about where its customers live and what they like to buy.

"We wanted [business intelligence] to exist outside of IT so it could move quickly," he said. "It was inspired by our founder to be quick and agile for making business decisions. We're successful primarily through being able to understand the business through business intelligence."

Making sense of all that information isn't the job of IT. It's up to the business to figure out how it wants to use that information. IT just delivers the tools to let business users utilize the data.

"[Business intelligence] definitely can't be an IT project," Carper said. "I don't think it has much value without the business. It has [been] facilitated by business intelligence and technology, but it's largely a business analytics function. The business should feel like they own this to a certain extent."

Atlanta-Area Companies Drive Efficiency, Performance and Growth with SAP

Across the Region, Leading Businesses of All Sizes Power Business Strategy by Choosing SAP

ATLANTA - April 20, 2007 - Showcasing its growing presence in the region and the depth of its solutions to serve businesses of diverse size and industry requirements, SAP AG (NYSE: SAP) today announced that increasing numbers of Atlanta-area companies are leveraging SAP software for ongoing innovation, more efficient operations and sustainable growth. In addition to expanding relationships with established customers across the region, SAP and its partners have added new customers—from small businesses and midsize companies to global industry leaders—to the hundreds of companies and thousands of end users running SAP software in the Atlanta area. The announcement was made on the eve of SAPPHIRE® ’07, SAP’s international customer conference, being held from April 23 – 25, for the first time in Atlanta, Georgia.

Atlanta companies ranging from The Coca-Cola Company, Coca-Cola Enterprises, Georgia-Pacific and The Home Depot, to Checkfree, Dhaksha Technologies, Gwinnett County, MacGregor Golf, and a growing number of small businesses including Structural Products Corporation, Georgia State Floral Distributors and Industriaplex, are among the area businesses which have expanded or established new relationship with SAP in recent quarters by deploying SAP applications. The growth in SAP’s local customer base comes as SAP delivers the benefits of solutions designed on the business-driven blueprint of enterprise service-oriented architecture (enterprise SOA) to companies across the globe, and at an inflection point in the transition to SOA, an architecture that enables software functions, or “services,” to be combined quickly and flexibly to perform new business processes.

MacGregor Golf Drives with SAP
MacGregor Golf, a leading designer and manufacturer of golf equipment, completed an implementation of ARIS SmartPath for Durable Goods, an IDS Scheer offering of SAP® All-in-One software bundled with ARIS Reference Models and SAP implementation services. Working with SAP partner IDS Scheer, MacGregor Golf has improved its customer order entry system and begun to take advantage of lean manufacturing practices. The solution will also be rolled out to the company’s offices in Japan and the United Kingdom.

“MacGregor Golf is one of the oldest golf companies in the world with 109 years of tradition, innovation and product excellence,” said Jay Verenakis, chief information officer, MacGregor Golf. “With the deployment of ARIS SmartPath for Durable Goods, based on SAP All-in-One, we are now in position to better serve our customers and realize business process efficiencies.”

Local Small Businesses Drive Efficiency, Customer Service with SAP
A premier provider of retail, commercial and industrial infrastructure products and services, Industriaplex manages international supply chain logistics required to plan for and respond to the needs of its customers. As a startup that rapidly outgrew Peachtree and spreadsheet applications, Industriaplex first implemented SAP® Business One with SAP partner ASE to manage financials, standard light manufacturing, and standard sales order processes. To support its ongoing business strategy, Industriaplex next worked with ASE to integrate SAP Business One with a hosted facility management service from Corrigo so that call center and dispatch services can now programmatically feed SAP purchasing and goods receipt functions.

“With the solution from SAP, we have reduced our reliance on manual spreadsheets, taken complexities out of our business, achieved greater visibility and control,” said John Drake, general manager – IT, Industriaplex. “We are now postured to handle our rapid growth in our ever-changing marketplace.”

Based in Norcross, Ga., Structural Products Corporation (formerly Atlanta Structural Products) began servicing metro Atlanta’s engineered floor system needs in 1984, specializing in engineering, designing and selling engineered floor systems for residential construction. When the company outgrew homegrown IT systems, it looked for an integrated business management package that could provide visibility in a consolidated view of mission-critical across the company. It also looked for a solution that would allow the company to easily customize applications specific to the unique needs of its business.

“We evaluated several competing packages, including Great Plains, but none provided the integrated set of applications and straightforward pricing of SAP Business One,” said Jason Shehane, systems and logistics engineer, and leader of the SAP deployment at Structural Products, which implemented the solution working with the Baer Group, a local SAP partner. “The solution’s software development kit is easy to use and allows us to develop the custom applications we need to remain responsive to changing business challenges.”

Atlanta Companies Shine at SAPPHIRE ’07
The SAPPHIRE ’07 event will bring thousands of SAP users to Atlanta and feature presentations on hundreds of SAP customer companies. On Monday, April 23, 2007, SAP and The Coca-Cola Company will be hosting a media visit—for media registered for SAPPHIRE—at The Coca-Cola Company’s headquarters in Atlanta.

In addition to its growing local customer base and SAPPHIRE ’07 event, SAP Americas’ presence in the Atlanta area also extends to a variety of philanthropic activities and causes including cash and in-kind contributions to non-profit organizations and higher-education institutions in the state of Georgia. SAP’s local community partners in Atlanta include Hands on Atlanta, Hands on Network, Bobby Dodd Institute, Techbridge, Knowledge is Power Program (KIPP) and Habitat for Humanity.

“The Atlanta area is a thriving hub of commercial activity, recognized across the globe as an international destination and home to many of the world’s leading companies,” said Bill McDermott, president and CEO, SAP Americas and Asia Pacific Japan. “As we prepare to host thousands of SAP customers and partners in Atlanta at our 2007 SAPPHIRE conference, we are pleased to showcase our growing customer base and commitment to businesses across the region.”

Next Major Events: SAPPHIRE® ’07 Atlanta and SAPPHIRE® ’07 Vienna
Join SAP and its growing ecosystem of partners to discover how co-innovation and open technologies are enabling customers to do “business at the speed of change,” improving business processes, expediting time to market and outthinking and out-executing the competition. Learn first-hand how organizations of all sizes and industries around the world are using SAP® applications to accelerate innovation and energize growth at SAPPHIRE® ’07, SAP’s international customer conference, being held in Atlanta, Georgia, April 22-25, and in Vienna, Austria, May 14-16, 2007. For more information, please visit

This year, SAP and the Americas’ SAP Users’ Group (ASUG) are co-locating their premier events in Atlanta, where the 2007 ASUG Annual Conference takes place April 22-25.

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About SAP
SAP is the world’s leading provider of business software*. Today, more than 39,400 customers in more than 120 countries run SAP® applications—from distinct solutions addressing the needs of small businesses and midsize companies to suite offerings for global organizations. Powered by the SAP NetWeaver® platform to drive innovation and enable business change, SAP software helps enterprises of all sizes around the world improve customer relationships, enhance partner collaboration and create efficiencies across their supply chains and business operations. SAP solution portfolios support the unique business processes of more than 25 industries, including high tech, retail, financial services, healthcare and the public sector. With subsidiaries in more than 50 countries, the company is listed on several exchanges, including the Frankfurt stock exchange and NYSE under the symbol “SAP.” (Additional information at <>)

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