SAP's Q4 sales: Good, but short of expectations

SAP talks up its fourth quarter results, but revenue was short of consensus estimates. Worries about HANA start to emerge.

SAP outlined the first look at its fourth quarter results and they fell short of revenue expectations.

There was a bit of a disconnect between SAP's glowing press release, talk of innovation and four years of double digit growth and the investor reaction, which was muted. SAP's operating profit appears to be inline with expectations. What's unclear is whether analysts are expecting too much or SAP will struggle putting up double-digit revenue growth in 2014. 

SAP was trading at $83.60 at midday, not far from a 52-week high of $87.42.

The software giant outlined the following results for the fourth quarter:

sapq4 results


The problem: SAP's fourth quarter sales were below consensus estimates. For instance, Wall Street was expecting revenue of €5.18 billion for the quarter, according to Cowen analyst Peter Goldmacher. Software license revenue was also shy of the €1.94 billion expected. Cloud revenue was short of €216 million expected in the fourth quarter. And HANA revenue of €633 million was short of SAP's guidance of €650 million to €700 million at constant currencies.

SAP's big takeaway is that its cloud subscription and support revenue was up 66 percent from a year ago. The company added that its cloud revenue run rate tops €1.06 billion.

Indeed, SAP's cloud business fared relatively well. However, the HANA results are worrisome. Goldmacher said in a research note:

While we commend management for cost controls that likely preserved earnings, and while the company's Cloud business did relatively well (the Street was well ahead of guidance), we note that about half of the revenue shortfall was in SAP's much-hyped HANA business. While an interesting technology, we continue to believe that emerging flexible, low-cost data management solutions are dampening interest in premium solutions such as HANA.

Here's a look at SAP's 2013 recap. The company reports its results Jan. 21 and will provide an outlook for 2014 then.

sap 2013 results