SAP shuffles management, maintenance decks; Analysts question 2010 prospects

SAP reshuffled its management team and said that it will bring back pricing tiers to customers.First, the pricing tiers.
Written by Larry Dignan, Contributor

SAP reshuffled its management team and said that it will bring back pricing tiers to customers.

First, the pricing tiers. In 2008, SAP said it would move customers to more full-featured but pricier enterprise support packages. That move raised a series of hackles. Now it appears SAP is going back to the future.

In a statement, SAP said it will bring back standard support and would hold support and maintenance prices at 2009 levels. Boiled down to its basics, standard support is 18 percent and enterprise support is 22 percent of original licensing fees, according to analysts.

Along with the support changes, SAP also reshuffled the management decks.

The company will create an Industry and Solution Management Board under John Schwartz, who is primarily in charge of Business Objects. The board is designed to "translate market requirements faster into SAP's future portfolio of solutions."

Another board focused on product design and development will be led by Jim Hagemann Snabe, who oversees SAP's technology platform.

Meanwhile, Bill McDermott, president of SAP's global field operations also named new executives to head up key regions such as Europe, Asia Pacific and India.

Separately, SAP said that its total revenue would be Euro 3.18 billion, down 9 percent. Operating margin will be 32.8 percent, down 4 percent from a year ago.

Analysts noted that SAP's preliminary fourth quarter results were better than expected, but still expected a tough 2010.

JMP Securities analyst Patrick Walravens said in a research note that "we are hopeful these changes may help, fundamentally we believe SAP faces a tough 2010." He added:

Even with the 4Q upside, the business continues to shrink, the company really struggles with the trend toward cloud computing, and we continue to expect maintenance revenue to be under pressure in 2010.

Walravens also expects customers to downgrade to standard support.

William Blair analyst Laura Lederman agreed about SAP's prospects:

Despite the positive fourth quarter, our main concern with SAP going forward is long-term revenue growth. Although the company faces easy comparisons and is benefiting from some pent-up demand, much of its base has upgraded (and paid the associated fee) to its newest version. In addition, the company does not have a truly new generation offering, like Oracle does, to drive results beyond 2010.

Related: SAP 2010 collapse and other nonsense

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