Finally, SAP (SAP, Financial) is the largest European enterprise software company and the global leader in enterprise resource planning (ERP) software products. Its share price underperformed both the broader market and its software peers over the past year as a result of a revised business strategy, unveiled in October 2020, which called for an accelerated transition to the cloud. This transition will depress near-term revenue and profits as upfront license sales become overtime subscription payments, but long term, this move will increase growth and improve customer economics. This short-term setback gave us an opportunity to invest in one of the most defensive software companies in the market. The company's recent IPO of a portion of Qualtrics highlights the disconnect between how the market values SAP's parts compared to its whole. We expect SAP to accelerate to high single-digit, top-line growth over the next five years as the economic benefits of its cloud transition become apparent.
From David Herro (Trades, Portfolio)'s Oakmark Global Fund first-quarter 2021 shareholder commentary.
