digibyte - SAP blows out Q4 2015 in pre-announcement

Den Howlett Profile picture for user gonzodaddy January 11, 2016
Summary:
SAP surprises with solid Q4 2015 numbers not just on cloud but across the board.

I don't know how many times I've said it but I will repeat it again: Never write off the behemoth that is SAP. Its Q4 2015 pre-announcement is testimony to that position as SAP continues to defy the 'cloud only' naysayers. I will get into why this is the case at a later date but for now I will restrict myself to congratulating the SAP team for managing to put two fingers up to the market while driving ahead with its cloud strategy.

By the numbers:

SAP results Q4 2015

The cloud side of things will likely capture market attention but I am surprised to see the software license section grew 15% in the quarter. Who would have thought that in a world where we are told that everyone is moving to the cloud? I must admit to being surprised at one level but then SAP is the best company I know at customer account management.

SAP lards its announcements with color on IFRS versus non-IFRS numbers and this quarter is no different. It said:

IFRS cloud subscriptions and support revenue was €2.29 billion (2014: €1.09 billion), an increase of 110%. Non-IFRS cloud subscriptions and support revenue was €2.30 billion (2014: €1.10 billion), an increase of 109% (82% at constant currencies). IFRS software licenses revenue was €4.84 billion (2014: €4.40 billion), an increase of 10%.

Taken together, this is a seriously good performance.

What may not be so obvious to outsiders is the fact that SAP does not push a bunch of costs through the balance sheet by stock options. This strategy allows it to regulate earnings in a manner that pleases the markets while avoiding a cash drain. `

There is a shed load of detail behind this announcement that I have yet to digest but as has been the case the last few years, I cannot fault SAP's strategy for both customer retention and growth.

One thing I will say. SAP has struggled to make itself appear as the 'cool kid' on the enterprise block. We can have that discussion across multiple dimensions. Regardless. Results speak louder than rhetoric and here, SAP has delivered. Well done team SAP.

Some will get bogged down in the fall of three percent operating profit but those same folk are those who promote growth over profit. SAP cannot win in that argument but then when was the last time I paid attention to what to me are foolish metrics?

More to come once I've had time to digest the numbers and speak with 'those how know.' In the meantime, well done.

Disclosure: SAP is a premier partner at time of writing. 

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