GuruFocus Premium Membership

Serving Intelligent Investors since 2004. Only 96 cents a day.

Free Trial

Free 7-day Trial
All Articles and Columns »

SAP - All Set for Growth

March 21, 2014 | About:



SAP is a leading player in the ERP software segment, one of most trusted software companies in the world for ERP solutions and a favorite choice of many business houses. The German company is well-known for implementing ERP (Enterprise Resource Planning) system. Other than ERP, data mining and data warehousing solutions are also provided by the company. Recently, the company is focused on business solutions in public and private cloud computing that has been catalytic to its revenue growth.

Financial Performance

SAP’s fourth quarter results was declared recently, SAP's revenue grew 7% year over year to $6.9 billion. Other than the success of SAP-HANNA, growth was also driven by higher revenue from support services, which were up by 10%. Software and software-based services witnessed a growth of 6%, and cloud-enabled subscription-based solutions reported 8% growth. This growth was achieved despite pressure in Asian countries, especially China.

Despite an uncertain EMEA market, it still recorded year-to-year growth of 9% from its software services and cloud solutions. It recorded double-digit growth in Asia Pacific & Japan courtesy of its cloud-based subscription.

SAP continues to generate an impressive cash flow of $3.2 billion, up by 3% year over year, while there was phenomenal growth of 37% in cash and cash equivalents that amounted to $4.4 billion.

SAP's major acquisitions and innovations have helped it dominate the cloud, and this has started showing positive results in terms of comparative revenue growth. And its acquisition-based strategy of growth should lead to more revenue growth in the future.

Acquisitions & Joint Ventures to Expand Market

SAP's acquisition of hybris, an e-commerce solution provider, enabled it to venture into omni-channel commerce. The total estimated market size of this segment is around $37 billion according to analysts. With hybris being a leader in commerce solutions, its combination with SAP's expertise should lead to synergies and help it capture a portion of this sector.

Also, SAP's HANA success stories continue and are major contributors to its revenue growth as businesses move to the cloud around the world. SAP expects an increase in its revenue from cloud subscription services and software.

In India, SAP has joined hands with Wipro for providing SAP HANA solutions. Since the Indian market is still nascent as far as cloud computing is concerned and Wipro is a leading software company in India, the partnership would be beneficial for SAP, as Wipro has a huge client base with over 140,000 clients spread in over 57 countries.

Competitor (CRM) is a company with its core business model being CRM (Customer Relationship Management) on the cloud. The company has been awarded for being the world's most innovative company for two consecutive years by Forbes and for CRM excellence by Gartner and many more.

Salesforce is one of the direct competitors of SAP. Just before SAP acquired hybris, Salesforce also acquired ExactTarget for $2.4 billion. ExactTarget's solutions was focused on multi-channel marketing automation and the company had around 6,000 customers including the likes of Nike and Coca-Cola. So this deal is helped Salesforce to grow at a fast rate.


Looking at SAP's innovations and tie ups to profit from "Business solutions on the Cloud" I think that the company is in a good position to increase its revenue. Its year over year growth even in uncertain global economic conditions shows its strength and the necessity of its products. As more businesses move to the cloud, SAP's performances will improve and investors would benefit.

Rating: 3.0/5 (1 vote)



Please leave your comment:

Get WordPress Plugins for easy affiliate links on Stock Tickers and Guru Names | Earn affiliate commissions by embedding GuruFocus Charts
GuruFocus Affiliate Program: Earn up to $400 per referral. ( Learn More)
Free 7-day Trial