SAP focuses on amplifier growth with cloud software – Reuters Germany

– by Ilona Wissenbach

Walldorf (Reuters) – Software giant SAP dares thanks to the continued strong growth in the cloud business in the coming year to more sales, remains the profit target but cautious.

The company increased its sales forecast for 2017 by up to a half billion to 23 , from 0 to 23.5 billion euros. However, the target for the operating profit of up to seven billion euros did not increase SAP on Friday, but concentrated only the margin. The return on sales thus lets SAP crumble consciously continue to grow, as CEO Bill McDermott said. “We are not here to harvest margins,” McDermott, who was via telephone by the World Economic Forum in Davos said.

In cloud-business customers can use the Internet software or memory use, which are provided by external computers available to them. The income spread it over several years, while the sale of a license to install the client software, the price is fully paid at the beginning. Cloud software is therefore not as profitable as the traditional license business: Last year, the gross margin around 20 percentage points in the growth segment was 66 percent below that of the core business. The operating margin will be deducted for more cost than the gross margin would have, on average 29.5 percent in 2017 with one percentage point lower than 2015 and a half percentage points below the initially targeted level. SAP had abandoned its return target of 35 percent a year ago. Such margin will not reach the cloud division until the next decade, said Chief Financial Officer Luka Mucic.

The sharp rise in the past year share the Dax Group fell by up to 2.5 percent, even though the overall market was clearly positive. The outlook for 2017 is consistent with the market expectations, said an analyst. “It is perhaps a touch higher, but not so that you would have to say ‘Wow’.”

Mucic: no further staff cuts

Last year, SAP had earned 6.35 billion euros surgery, as much as the prospect asked. By contrast, the surplus shrank by seven percent to 3.06 billion euros. This was due to special factors such as the cost of acquisitions, restructuring and employee bonuses. This year will be spent on far less money, because no company-wide staff reductions more was planned, explained Mucic. Last year, 3,000 employees had accepted the offer of voluntary early retirement SAP world. However, many more people have been re-adjusted so that the number of employees by 2500 rose to nearly 77,000. According Mucic work In Germany, approximately 18,000 men and women at SAP, which were at the end of 380 more than the year before.

The targets for 2020 was unchanged SAP: Operating profit should then between eight and nine billion euros are a total turnover 26-28 billion euros. SAP feels According to McDermott in advantage both against the archrival Oracle as well as offer new competitors, the cloud software for individual business functions such as marketing and sales specialist Salesforce. With the introduced about five years ago database technology Hana doing SAP Oracle customers alienated said McDermott. For before Hana SAP had no database that customers had for SAP programs databases from Oracle to use.

The rules of the game on the market for corporate IT changed straight, McDermott said. Many CEOs in Davos had told him that she no longer wanted a patchwork of software but uniform solutions. It will therefore be a consolidation in the industry. As in boxing or in football there can also be only one champion in the market for corporate software. “And that is SAP be.”

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