SAP is picking up the pace in the cloud business

Created: 01/14/2022, 12:18 p.m

A company logo of the software group SAP is attached to a company building.

© Uwe Anspach/dpa/archive image

The software giant SAP invests a lot of money in growth initiatives.

The business with software for use via the Internet is growing.

The share culture in the workforce is promoted with effort.

Walldorf - Europe's largest software manufacturer SAP did more business than initially expected thanks to a final spurt, especially in cloud software.

Group sales rose by two percent year-on-year to EUR 27.84 billion, as the Dax heavyweight announced on Friday night in Walldorf.

"The accelerated growth promises even greater opportunities in the future," said SAP CEO Christian Klein.

The top manager referred above all to the success of the still young product bundle "Rise", which is intended to make it easier for customers to switch to cloud software - i.e. programs for use over the network - more quickly.

The group sees itself as the world market leader in software for controlling companies.

The Walldorf-based company is currently investing a lot of money in growth initiatives, cloud applications are not yet that profitable - and exchange rate effects are slowing down.

Earnings before interest and taxes adjusted for special effects - i.e. the profit from day-to-day business - fell by one percent to 8.23 ​​billion euros.

However, last year's sales and earnings were slightly better than analysts had expected.

In some cases, SAP even exceeded earlier company forecasts.

The bottom line is that net profit rose by two percent to 5.38 billion euros.

True, SAP had to spend a lot more money on stock-based employee compensation.

However, the group's venture capital subsidiary, Sapphire Ventures, benefited from the good performance of its investments throughout the year.

The technology group wants to take big steps forward in terms of growth in the new year.

The profits from the day-to-day business have to take a back seat because of the high investments.

The group assumes that the operating result will remain stable at best - and could even drop by five percent at the lower end of the forecast range.

The stock rose at the start of trading on Friday, but then fell back again.

SAP intends to present even more detailed business figures on January 27th.

“More and more companies are turning to SAP to help them reposition themselves, build stable supply chains, and become sustainable businesses on their journey to the cloud,” said Klein.

The manager wants to significantly boost the cloud business in the coming years so as not to be left behind in the business software market.

Subscription cloud software for use over the network is considered the future of the industry and is already standard in many areas.

Klein is aiming for a currency-adjusted increase in sales of 23 to 26 percent for cloud software in the new year - significantly faster growth than last year, when cloud revenue increased by around a sixth to 9.42 billion euros.

SAP must also pick up the pace here in order to generate more than 22 billion euros in sales with programs from the cloud by 2025, as Klein had announced.

However, many investors are skeptical that this will be possible by then.

Because the competition from the US tech groups Oracle and Salesforce SAP is breathing down their necks and market share could be lost, Klein launched “Rise” at the beginning of last year.

Now he spoke of a "huge success" of the offer.

Accelerating cloud businesses requires investments in technology, products and advertising.

In addition, the cloud products are initially not as profitable as expensive software packages in a one-off license sale, but should gradually pay off over the term - because the cloud software is either paid for as a subscription or through usage fees.

SAP wants to buy back shares worth up to a billion euros this year.

The purchased securities are intended to be used for future awards under a share-based payment program.

“By balancing our share-based payments for new awards from 2022 primarily with shares rather than cash payments, we want to further strengthen the equity culture in our workforce and ensure that the interests of our employees are closely aligned with the interests of our shareholders,” said Chief Financial Officer Luka Mucic.

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According to its own information from October, the group runs 67 data centers in 17 countries.

At the end of last year, around 107,400 people were employed, which was an increase of around 5,000 in a year-on-year comparison. dpa