SAP's results are a right Waldorf salad: Core sales dip, yet support biz is stable

And its cloud is embiggening at a ridiculous rate

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SAP has confirmed a sudden and sharp drop in sales of its software with continued, escalating sales of cloud.

Sales of new licences for its core, on-premises software fell 13 per cent in the first three months of 2016 to €609m, compared to the first quarter of 2015.

It was a sharp about-turn given SAP closed the last three months of 2015 with growth of 15 per cent in sales of its software licences, hitting €2.1bn.

Support sales, the long-term lifeblood of firms like SAP, grew four per cent to €2.6bn.

SAP did not address the slump in its core business directly but overall pointed to a slow-down in spending in the Americas – with North America slowing after a strong fourth quarter of fiscal year 2015 – and instability in Latin America, particularly Brazil.

Sluggish performance in the on-premises business is a problem for SAP, as – despite growth in cloud – this still accounts for the majority of the firm’s business. Further, SAP has succeeded in continuing to sell the core product, while its biggest rival, Oracle, has seen sales of new licences for its software decline.

On the cloudier side of life, SAP experienced continued expansion, growing 35 per cent to €677m.

Overall, SAP’s revenue increased five per cent to €4.7bn with net profit up 38 per cent to €570m. Earnings per share was also up by 38 per cent, to €0.48.

Commenting on the results, SAP reckoned it had “high visibility” of a “strong second quarter full year pipeline.” It stuck to its guns for full-year results of non-IFRS operating profit to be in a range of €6.4bn – €6.7bn under constant currencies – versus €6.35bn in 2015. ®

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