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SAP Poised to Take On Oracle With HANA

Posted on Thursday, May 3rd 2012

SAP is banking on emerging technologies including big data, cloud and mobile to help drive growth in the coming quarters. The company is focusing on becoming the fastest growing database provider in the world by the year 2015 as it continues to invest in memory database technology product, HANA and additional new products.

SAP’s Financials
SAP’s (NYSE: SAP) Q1 revenues of Euro 3.35 billion (~$4.4 billion) grew 11% over the year and were marginally shy of the market’s projected revenues of $4.50 billion. EPS of $0.65 for the quarter was also short of the Street’s targeted $0.66.

By segment, cloud subscriptions and support business grew 625% over the year to Euro 29 million (~$38 million) as it continues to drive growth in cloud and mobile businesses. Support service revenues grew 14% to Euro 1.96 billion (~$2.6 billion). Revenues from Asia Pacific markets grew 22% to Euro 440 million (~$580 million) driven by strong traction in China, Japan and India. Revenues in the U.S. grew 12% during the period to Euro 946 million (~$ 1.24 billion) and EMEA revenues of Euro 1.23 billion (~$1.62 billion) grew 10% over the year.

SAP expects this fiscal’s revenues of Euro 12.5-12.7 billion (~$16.4-$16.7 billion) with operating profits of Euro 5.05- 5.25 billion (~$6.6-$7.0 billion). The market was looking for revenues of $20.97 billion with EPS of $4.01.

SAP’s Big Data Offering
SAP is focusing on growth through development of High-Speed Analytical Appliance, HANA. Analysts believe that HANA is SAP’s key to the big data problem. HANA is essentially a platform that can be used for development of analytics applications to process more volumes of data at a faster pace. During the last quarter, HANA raked in over Euro 28 million (~$37 million) in revenues for SAP. The company plans to grow those revenues to at least Euro 320 million (~$420 million) thus grossing nearly twice the revenues as that reported a year ago. SAP is targeting its current customer base to shift from its existing databases to HANA. SAP executives are confident that SAP will be able to successfully compete with existing Oracle databases.

To increase adoption of HANA, SAP also announced plans to spend nearly $500 million in incentive programs. The $337 million SAP HANA Adoption Program is for new customers transitioning from legacy databases to HANA. SAP will offer customers consulting services for adoption and implementation of HANA. Additionally, SAP created a new SAP HANA Real-Time Fund with $155 million, which will be managed by SAP Ventures and used to support an ecosystem of entrepreneurs and investors focused on the development of real-time applications.

SAP also released a BusinessObjects Predictive Analysis package to enable predictive analysis algorithms and help in development and visualization of tools for building data models used by analytical applications. The new package will be available to select customers initially and will be readily available in the market by September of this year. The tool will help organizations identify trends and perform analyses to make predictions for tasks such as improving sales and identifying fraudulent transactions.

SAP’s Mobile & Cloud Focus
SAP is also focused on the mobile and cloud segments, targeting current fiscal revenues of Euro 220 million (~$290 million) from the mobile business. Earlier last month, SAP executives announced plans to acquire mobility solutions provider, Syclo. Syclo was also SAPs partner in providing enterprise mobile applications. Product offerings include solutions for enterprise mobility on smart devices such as iPhones and BlackBerrys. Syclo brings with it a customer base of over 600 organizations in 39 countries spanning industries that include utilities, oil and gas, life sciences, and manufacturing.

Within the cloud business, SAP is helping drive the performance of recently acquired SuccessFactors. Over the last quarter, SuccessFactors’ sales grew 70% over the year. To ensure that SAP does not overpower SuccessFactors’ growth prospects, the SAP board also appointed SuccessFactors CEO Lars Dalgaard onto the board.

SAP’s stock is trading at $66.43 with a market capitalization of $79.07 billion. It touched a year high of $72.52 in March this year.

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