SAP Figures Show Small Increase, Great Things Expected of Sybase

By David Roe | Published Jul 29, 2010

While there have been a number of financial results releases over the past couple of weeks, one of the more interesting is from SAP (news, site), not only because its software business is often used as a market indicator, but also because of the recent closure of the massive Sybase deal.

While revenues were up to US$ 2.89 billion — 12% — on the same quarter last year, most of the growth was attributed to favorable currency exchange between Europe and the US, which if taken out of the equation would show a much more modest growth of 5%.

SAP’s Improving Markets

In a statement issued with the release, SAP said they expected things to get better over the rest of the year particularly in its core areas of software and related services, but tellingly added that they also expected the Sybase acquisition to add considerably to revenues within the next six months.

The principal figures include:

Year-on Year net profits of US$ 491 million up from US$ 426 million or 15 %
Software sales grew 17% to US$ 637 million
Software support revenue grew 14% to US$ 1.53 billion
Subscription and software-related service revenue rose 30% to US$ 95 million

SAP and Sybase

The importance of the Sybase acquisition, however, can’t be underestimated for SAP and it is clearly expecting great things from this space. In this respect it's worth noting that for the entire year SAP is predicting that full-year revenue from software and software-related services will grow at between 6% and 8%.

But with Sybase, SAP is expecting revenue growth of between 9% and 11%. And with regulatory approval last week the US$ 5.8 billion cash deal is now all but closed.

Only recently Sybase released its second quarter figures, which saw net income for the mobile and database technology developer jump by 20%. Revenues rose to US$ 302 million from US$ 278 million for the same quarter last year, representing an increase of 9%.

This was broken down into license revenue of US$ 100.1 million from US$ 94.1 (an increase of 6%), while services revenue rose 5% to $147.2 million, and messaging revenue up 24% to $54.8 million.

SAP’s Software

This will be a welcome addition to the books of SAP, which is experiencing mixed fortunes across the world. Unsurprisingly software revenue in Europe is down 9% as most economies and companies felt the recession bite deeply over most of 2009, with the Middle East and African economies following suit.

However, an indication perhaps that the US is on the way up again can be seen in the 64% growth in the Americas, while software growth in Asia is up 11%. SAP is optimistic though:

Customers continue to invest for growth across large, midsized and small enterprises and within many industries …“We had outstanding growth in strategic markets like the U.S… .This solid performance is due to renewed customer confidence, an ever-expanding ecosystem, as well as focused execution on our go-to-market strategy,” Bill McDermott, Co-CEO of SAP said.

SAP and Oracle

Finally, in what can probably be interpreted as a poke at Oracle (news, site) who’s financial releases are generally used as a platform by Oracle CEO to hit at SAP, Jim Hagemann Snabe, the other SAP CEO compared its acquisition strategy with its competitors, without mentioning Oracle, which is definitely there between the lines.

SAP's acquisition strategy is “very very different” from those of its competitors he said in a conference call. If market share is your only goal then to make savings that justify the costs a lot of people have to be laid off.

If you acquire for innovation as SAP says it did with Sybase, then apart from day to day benefits the real benefits will eventually become obvious in improved products and a bigger customer base. Time will tell what exactly the Sybase deal means for products.