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SAP’s Acquisitions Keep Stock Price Up

Posted on Monday, Mar 25th 2013

According to Gartner’s Forecast Analysis: Enterprise Application Software, Worldwide, 2011-2016, 4Q12 Update, global spending on enterprise application software is projected to grow to $158 billion by the year 2016. Enterprise Software spending stood at $115.1 billion in 2011. Enterprise resource planning (ERP) will dominate spending on software with 20.8% being spent on them by the year 2016. The ERP market is projected to grow annually at 6.7% over the period 2011 through 2016 to reach $32.9 billion worldwide.

SAP’s Financials

SAP’s (NYSE:SAP) Q4 revenues grew 11% over the year to €5.0 billion (~$6.51 billion) falling short of the Street’s target of €5.13 billion (~$6.67 billion). EPS of €1.14 (~$1.47) was above the Street’s targeted EPS of $1.26

By segment, revenues from software & cloud subscriptions accounted for 41.4% of the quarter’s revenues and grew 8% over the year to €1.93 billion (~$2.5 billion). Support revenue grew 10% over the year to €2.1 billion (~$2.7 billion), and Software and Software-Related Service Revenues grew 15% to €4.2 billion (~$5.5 billion).

SAP’s mobile initiatives bore them good results and accounted for more than €220 million (~$283 million) for the year. HANA in-memory database software also saw revenues of €200 million (~$258.13 million) during the quarter and recorded €400 million (~$516.26 million) for the full year. HANA’s revenues grew 145% over the year.

By region, revenues from the EMEA markets grew 5.9% to €2.36 billion (!$3.1 billion). The Americas grew 15.5% attributed to their partnership with the NFL and strong growth in the emerging markets of Latin America. The rest of the world saw revenues grow 15.6%, driven by growth in Japan and China.

They ended the year with revenues growing 16% to €13.16 billion (~$16.99 billion) and earnings falling 18% to €2.83 billion (~$3.65 billion).

SAP’s Acquisitions

As part of SAP’s continued focus on HANA, their in-memory database software, they recently announced the acquisition of SmartOps. SmartOps is known for their inventory and service level optimization software. Their software helps organizations manage supply chain management (SCM) planning. Their customers are able to use variables such as capacity, demand, inventory, lead time and product availability to better manage working capital for growth. The acquisition is expected to complement the HANA offering by providing the capability to build a “real-time supply chain” solution on HANA. Terms of the deal were not disclosed.

To target the insurance sector, SAP also announced plans to acquire Camilion, a leading provider of insurance products. Camilion’s software products help insurers manage their products better so that they can bring newer products to the market in a shorter time span. Through Camilion’s software, insurers are able to update core systems and increase the quality of their business by getting improved data analysis and simulation. SAP plans to expand their offerings to the insurance sector through the acquisition. They will be able to offer insurance brokers and underwriters tools that will help them increase speed of transactions.

The market has reacted positively to SAP’s acquisitions. Their stock is trading at $80.72 with a market capitalization of $96.22 billion. It touched a 52-week high of $84.66 earlier this month.

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