In an unusual move, SAP pre-announced strong anticipated results for Q3 fiscal 2011. According to the blurbs, SAP expects to record increases across the board:
- IFRS software revenue was €841 million (2010: €656 million), an increase of 28% (32% at constant currencies).
- IFRS software and software-related service revenue was €2.69 billion (2010: €2.32 billion), an increase of 16%. Non-IFRS software and software-related service revenue was EUR2.69 billion (2010: €2.35 billion), an increase of 14% (18% at constant currencies).
- IFRS total revenue was €3.41 billion (2010: €3.00 billion), an increase of 14%. Non-IFRS total revenue was €3.41 billion (2010: €3.04 billion), an increase of 12% (15% at constant currencies).
- IFRS operating profit was €1.76 billion (2010: €716 million), an increase of 145%. Non-IFRS operating profit was €1.13 billion (2010: €915 million), an increase of 23% (26% at constant currencies).
- IFRS operating margin was 51.5% (2010: 23.8%), an increase of 27.7 percentage points. Non-IFRS operating margin was 33.0% (2010: 30.1%), or 33.0% at constant currencies, an increase of 2.9 percentage points (2.9 percentage points at constant currencies).
Included in the statement was reference to an adjustment related to the TomorrowNow case. In that action, the judge vacated the original award of $1.3 billion, giving Oracle the option to accept $272 million or opt for a re-trial. Details were not provided as to the total impact the adjustment has on the results.
More on TomorrowNow:
Why is SAP accepting TomorrowNow liability at this time? Jury slams SAP $1.3 billion in TomorrowNow lawsuit
SAP plans to hold an investor call 26th October. At that time, all eyes will be on the extent to which SAP is able to report progress with its Sybase acquisition, BusinessObjects releases, mobile and HANA.
SAP is maintaining previous growth guidance in the 10-14% range. In an investor note, Morgan Stanley's Adam Wood said:
Our channel checks suggest that SAP has enjoyed a strong quarter overall. We believe that demand has been driven by BI/Analytics and there were still larger deals in the quarter (and some which remain in a strong pipeline). We also understand that SAP has continued to reduce discounts to customers which reinforces our checks. This helps drive licence growth and suggests end demand has remained strong. Despite some initial technical challenges, we believe HANA has seen good demand in the Q and should be on track for its FY targets. We also hear that Mobile demand is strong.
The current Q3 estimates coming out of SAP are a little ahead of where Morgan Stanley anticipated.
The last nine months, co-CEO Bill McDermott has been talking up HANA, saying it represents the fastest growing pipeline in the company's history and claiming pipeline input of €10 million a week. He also suggested the company would achieve confirmed sales of €100 million for the year. In more recent times, the company has confirmed that HANA and mobile together will contribute €100 million in revenue. Confused? You should be. In recent meetings, the company claimed it has already achieved a pipeline of $500 million on mobile.
What is clear (sic) is that SAP is having some internal difficulty figuring out what is real revenue, what is transferred shelfware and what is wishful thinking.
Going forward, SAP needs to inject clarity into its cloud messaging. Next week, SAP User Group UK and Ireland is expected to release the results of a survey that indicate customers want clearer insight into SAP's roadmap. One wag I spoke with said it would also help if there was clarity on its cloud platform, strategy, product and value proposition. That makes some sense given the fact SAP has been very quiet on Business ByDesign.
More to come on the earnings call.
Disclosure: Morgan Stanley has been a recent client