SAP raises cloud sales outlook, cuts profit

Despite seeing a hit to profits for the year, SAP will plough ahead with its plan to cloudify its business.
Written by Liam Tung, Contributing Writer

German software giant SAP has cut its full year operating profit outlook as customers accelerate the shift to subscription-based cloud offerings.

SAP said on Monday it expects to see full-year cloud subscriptions and support revenue reach between €1.04bn and €1.07bn, up from the prediction it gave last quarter of between €1bn and €1.05bn. However, it cut its full-year operating profit forecast from between €5.8bn and €6bn to between €5.6bn and €5.8bn, pegging the decline on a "customer-drive mix shift" from upfront to cloud subscription revenue.

SAP announced on Monday that operating profits for the third quarter was €1.36bn, a rise of five percent year on year. According to a Reuters poll of analysts, the figure was slightly below expectations of €1.37bn. Revenues from SAP's software business increased seven percent year on year to €3.6bn.

Despite the impact of customers' shift to the cloud on its traditional software business, SAP executives reiterated the company's plan to embrace cloud offerings and highlighted they expect the move will pay off over time.

As Reuters reported, SAP finance chief Luka Mucic told analysts today that "de-accelerating in the cloud would make absolutely no sense" and that it was "hitting the gas pedal" on cloud, with expectations the company will see "positive returns in the longer run".

Big names the company has enrolled in its cloud include McDonalds, Vodafone and Coca Cola. European companies in particular have taken a shine to SAP's cloud offerings with cloud subscruptions and support revenue growing at 59 percent year on year, compared to 34 percent in the Americas.   

The heart of SAP's cloud strategy is its in-memory analytics platform HANA, and according to the company, it now has more than 4,100 HANA customers and over 1,450 Business Suite on HANA customers.

The other key component of its cloud strategy is the HANA Marketplace, an online exchange for testing and deploying  apps from SAP and third parties or purchasing memory in allotments between 128GB to 1TB.

To further the reach of HANA, SAP last week inked a deal with IBM to make SAP's HANA enterprise cloud available through IBM's cloud managed services and its infrastructure as a service firm, SoftLayer.

SAP also  plans to expand its number of datacentres to 20 by the end of 2014.

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