SAP Q3 2013 software revenue down for second successive quarter

Den Howlett Profile picture for user gonzodaddy October 20, 2013
Weakness in SAP's core ERP business was more than compensated by accelerating HANA and cloud revenues during the last reported quarter.

SAP Q3 2013
When past SAP earnings releases have come to hand, I have bundled the bare numbers and the attendant commentary. This quarter I am reviewing the bare numbers on their face in this post but saving most of the commentary for later in the day. This is because over the weekend there was something of a flap concerning Business ByDesign that was not addressed in the earnings statement but which requires separate explanation.

As is customary, SAP provides a significant amount of detail (PDF) about its results and this quarter was no exception. In common with other vendors, SAP prefers to talk non-IFRS when it suits it. I don't. IFRS is the accounting standard to which I pay attention. Anything else is make believe in my book.

Software sales, often viewed as an indicator of future maintenance revenues fell for the second successive quarter, declining five percent to €975 million from a tad over €1 billion in the same period of 2012. This was offset by increases in cloud and subscription services so that for the whole period, total revenue for software and software related services rose five percent to €3.35 billion. Consulting revenue fell sharply by 10 percent leaving total revenue up two percent to €4.045 billion.

The company maintained a good control over costs, despite increased headcount and some restructuring costs leaving the operating profit up 13 percent to €1.043 billion.

In their commentary on the results, SAP talks about strong headwinds from currency and the macroeconomic environment. If you look at the table below, it is clear that there was a significant impact from the weakening US dollar against the Euro although in the three months under review, there were significant swings.

Revenue by region

revenue - mgt view


Also in the commentary, SAP says:

2013 revenue and profit figures include the revenue and profits from Ariba, SuccessFactors and hybris. The comparative numbers for 2012 do not include SuccessFactors until February 21, 2012, Ariba until October 1, 2012.The hybris acquisition closed on August 1, 2013.

This makes direct comparisons with 2012 a little awkward. On the basis of what we know, it is clear that the core ERP business and especially the Business Suite  in general is in decline. That is despite a solid performance from EMEA. My estimates peg that decline at around seven percent.

On HANA, the company reported a significant uptick:

SAP HANA, the platform for real-time business applications, continues to be a major growth engine, with accelerating software revenue growth of 90% year-over-year at constant currencies (79% at actual currencies to €149 million) and over 2,100 customers. SAP Business Suite powered by SAP HANA is the best-in-class platform for high-performance applications and in fact SAP has now over 450 customers. Customers are showing strong interest in SAP HANA Enterprise Cloud.

This was something of a surprise. Even so, SAP reiterated year end guidance of HANA generating in the region of €650-700 million in contributed revenue with the company looking forward to achieving €1 billion in HANA related revenue in the medium term. Using the Q3 number, SAP pegs annual cloud revenue run rate at over €1 billion.

More to come once the analyst call is out of the way, later in the day.

Disclosure: SAP is a premier partner

Featured image via dahowlett

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