On Monday, preannouncements from IBM and SAP brought a fresh breath of air to the tech sector. And today, there are two major acquisitions in the enterprise software market. Looks like the dealmaking in the enterprise software sector will continue in 2008.
SAP AG (NYSE: SAP) preannounced that it expected fourth quarter revenue of €3.25 billion ($4.83 billion), up 10% y-o-y. Software and software related service revenue for Q4 is expected to be about €2.48 billion, up 13% y-o-y. Full-year 2007 software and software related service revenues are expected to be about €7.44 billion, up13% y-o-y (17% at constant currencies). It expects its worldwide share of Core Enterprise Applications vendors to be 28.5%, up from 24.5% in 2006.
Region-wise, in the Americas, software and software related service revenues for 2007 are expected to be about €2.50 billion, up 9%. In the EMEA region, they are expected to be up by 13% to about €3.98 billion. Asia Pacific Japan region is expected to see an increase of about 19% to approximately €0.96 billion. For the third quarter, 54% of its workforce was in EMEA (with 34% in Germany), 26% in Americas, and 21% in APJ.
That was quite a year for SAP. However, its operating margin is expected to be about 26.5%, down from 27.3% in 2006. This decline is mainly due to its heavy investment on its on-demand business software solution, Business ByDesign which targets the mid-size segment of the SaaS market.
Another major event last year was Shai Agassi, heir apparent, leaving the company in March. Read my post in which I said that SAP might lose more top executives of the Silicon Valley bent. It has happened. Most of Shai’s recruits are out. This is a case in point for a WSJ article in May this year that hinted at cultural barriers in SAP’s globalization efforts.
Another big expense in 2007 was the acquisition of French company Business Objects (NASDAQ: BOBJ) for $6.78 billion, a departure from its organic growth and small acquisitions orientation. All eyes are going to be on how SAP is going to integrate this acquisition. Recent reports say that Business Objects will operate as a standalone business under the SAP Group and SAP’s business user organization will go over to BOBJ. This should not make much difference culturally to SAP as it already has more than 42,750 employees at sales and development locations in more than 50 countries.
Overall, SAP is certainly going to play the role of a major acquirer this year alongside Oracle, IBM, HP, and presumably Sun. The question is, will SAP go after the SaaS consolidation I have been predicting?