Cross posted on my Gartner blog.
Here are some quick thoughts on SAP’s Q3 performance. It was was okay. It wasn’t awesome, but it wasn’t grim either. Have a look here for what the FT says.
The headline number of 20% revenue growth seems impressive but strip out the Sybase numbers and it is very similar to Q2. You can read what John Rizzuto and I blogged about Q2 here.
As Per Q2, for the deeper financial analysis I’ll defer to John.
Core software product revenue again saw double digit increases, which signals that end-market demand remains relatively robust and SAP is benefiting from the increase in spending. With double digit growth year to date thus far, it is safe to say that SAP has gained market share or growing ahead of the market. However, was is troubling is SAP’s difficulties in expanding operating margin or meeting targets it has set. While not troubling, i.e., it is still very fiscally fit, it does speak to the challenges the company is having in managing its business to create incremental leverage – although it is self evident from Wall Street’s perspective why we want comparable margins, it also matter from a competitive standpoint as well. Specifically, it begs the question from any industry watcher, what is it that enables the other megavendors (i.e., MSFT, IBM, ORCL, even HP and Cisco) to run their business at operating margins, on average, 10%-15% higher?
Gartner Clients might want to look at some of his other SAP related research.
Personally, I’m less concerned with the margin question, and more interested in the areas of customer satisfaction and new product innovation, as that is what I spend a good part of my day dealing with.
Snabe and McDermott both continue to paint a more positive and upbeat picture than their recent predecessors did. Both Sapphire and Teched were more energized than my in-memory can remember, as indeed are the last couple of earnings calls. The infectious exuberance in SAP-Land continues.
The anti-Oracle posturing has its place on earning calls, and trading taunts makes for good headlines. Nevertheless, it is not nearly as relevant for SAP customers as many observers think.
The challenge over the next 2 quarters is to show how the investment in newer technologies and applications is having a meaningful impact on the numbers. The market is the arbiter of innovation, not the vendor.
At the same time, the existing customer base needs to be brought along to the party. This means clear communication is at a premium. This is improving, but as the UK and German user groups note, there is still work to do.
SAP has a plan. Now it all comes down to execution.