SAP sees Q1 stumble on North America execution issues

SAP indicated that its sales problems in North America "have been resolved" and reiterated its outlook for the year.
Written by Larry Dignan, Contributor

SAP said that its first quarter will be below its initial expectations amid "sales execution issues in North America." As a result, SAP's revenue will miss estimates.

Here's what SAP sees for the first quarter.

Wall Street was looking for first quarter revenue of Euro 3.386 billion.

The SAP stumble comes after a week of aggressive announcements. SAP laid out plans to be the No. 2 database provider and poach accounts from Oracle to gain more customer wallet share. SAP also outlined its mobile plans.

On the bright side, SAP indicated that its sales problems in North America "have been resolved" and reiterated its outlook for the year. SAP also noted that "some European markets started more slowly in 2012, but are well on track."

SAP said in a statement:

Based on its robust pipeline SAP expects a strong second quarter 2012 with software revenue growth in a range of 15% – 20% at constant currencies and non-IFRS software and software-related service revenue growth in a range of 14% – 16% at constant currencies.

It remains to be seen if investors view SAP's first quarter miss as a blip or sign of bigger worries ahead. After all, Europe is in the middle of economic turmoil and austerity measures.

On a conference call with analysts, SAP co-CEO Bill McDermott reiterated the company's outlook. He said:

The pipeline worldwide is very strong. Some of the deals that didn't happen in the first quarter have already happened and we adjusted the leadership team where we needed to, such as North America, to get the focus back on the coverage model and the execution that we believe in. We've reviewed all the operations worldwide. Everybody got a chance to put their plan in front of us and they got some clear direction on what we expect, and we like the way the business looks everywhere around the world. And North America also will be back on track in Q2.

Analysts in a bevy of research notes indicated that SAP's second quarter outlook offset the first quarter miss.

SAP said it saw strong growth in Asia Pacific and Japan as well as double-digit growth in Latin America and Germany. SAP's cloud portfolio, including SuccessFactors, delivered double-digit growth in billings.

Regarding, SuccessFactors, co-CEO Jim Hagemann Snabe said:

We have seen a very successful close of the SuccessFactors deal and a very, very fast leverage of the combined force.We have gone from being a kind of a no-player in the cloud to become one of the major players. And what we're seeing is that the installed base has a huge interest for combining the SAP software they already have, and extending that into the cloud, in particular in human resource management, with the SuccessFactors' portfolio.


SAP and databases no longer an oxymoronSAP goes database happy: Can it dent Oracle?SAP database and mobility strategies: genius or madness? | SAP reveals database, mobile roadmaps through 2015 | SAP acquires Syclo; continues enterprise mobility push

Editorial standards