SAP includes e-commerce market to target - growth opportunities in China

The Walldorf software company SAP AG brought the day before the proposed acquisition of e-commerce specialist hybris successful conclusion. SAP announced in early June announced its intention to acquire the Swiss software company.

SAP has paid how much for the Swiss company, was initially unclear. However, industry sources speak of a purchase price of 1.0 to 1.5 billion U.S. dollars. SAP Co-CEO Bill McDermott said in a recent conference call of "fair price", the SAP had paid for the company in the face of growth assets.

SAP sees opportunities in e-commerce technology

The Swiss hybris is considered very promising. The company offers an e-commerce platform that is capable of running both on-premise and in cloud environments. In addition, the hybris software suite is fit for use both on the web and on mobile devices. Through integration with its in-memory platform Hana, analysis and cloud applications and social software platform SAP Jam, SAP hopes to add real value for its customers and existing hybris clients to create.

Hybris already serving companies such as 3M, Nikon, Bridgestone, Proctor & Gamble and Thomson Reuters. The developed software enables companies of hybris information about customers, products and orders on many channels to view. De facto allows hybris a holographic view of the customer, which company should be helped to sell more products and services to customers.

The acquisition of SAP (WKN: 716460) is regarded as the answer Walldorf to the planned acquisition of Exact Target through Salesforce.com. The reason e-commerce technologies are increasingly important. The market volume in this area is already estimated at 37 billion dollars and is growing more than twice as fast as the entire retail industry.

SAP wants to maintain investment plans in China

Another construction is currently the Asia business at SAP. The software and cloud computing sales declined in the second quarter to seven percent over the previous year.

Precisely for this reason, SAP plans to invest further. The goal is to rise in the coming years among the top 5 companies in China. Chief Financial Officer Werner Brandt cancels against the Euro on Sunday, plans to invest 2.0 billion euros in China over the next few years until 2015. In 2015, SAP plans to implement a billion dollars in China.

Brandt then also confirmed problems in China, which is facing the German software house of a difficult to predict demand. There were also internal problems recently, after the forma-celled head of China Business Hera Siu indulged a break. Recently, we have not found a replacement, the new head of the business in China would resume Shortest already in his work, Brandt announced.

Short Profile

The in 1972 launched and based in Walldorf software company SAP AG increased, especially in the 80s and 90s, the world's leading provider of ERP software (Enterprise Resource Planning) on.

This enterprise software company allows customers important data in relation to business processes, such as production, accounting, human resources and sales within a company to keep in mind and to optimize business processes. Already put more than 30,000 companies in more than 120 countries worldwide on software from SAP.

With the advent of the Internet, SAP expanded its product range accordingly and offers its Internet portal mySAP.com with the complex software suite mySAP Business Suite to both solutions for electronic procurement systems (supply chain management) and customer relationship management (CRM).

With NetWeaver, SAP wants to open new business opportunities and market integration in the market for application server. With the project "Business By Design", SAP intends to strengthen the middle class and in the market for cloud-based offerings. With the in-memory database, HANA SAP plans to analyzing large volumes of data in seconds allow...

In order to effectively edit the individual markets such as IT services and e-procurement systems, founded in 1997, the SAP subsidiary SAP SI. SAP SI was later re-integrated back into the group. In recent years, SAP reinforced through a series of acquisitions. In the spring of 2006, SAP took over the software vendor Virsa Systems, and the software specialists Frictionless Commerce. Mid-2006, the software specialist practice was acquired software. In the spring of 2007, the Company purchased the Norwegian software company and the Finnish MaXware Wizcom Communications. In the area of ​​Business Intelligence, SAP reinforced by the acquisition of Pilot Software and Soft Outlook. After the takeover of its partner SAP Arabia, SAP swallowed in the fall of 2007 the French analysis software manufacturer Business Objects. In spring 2010, the Company bought the U.S. software specialist Sybase. Previously, the Company had already swallowed the longstanding partner TechniData. In autumn 2010, then founded the SAP Mobile Business Unit. Early 2011 were taken from SECUDE assets. The end of 2011, SAP took over the cloud specialists Success Factors, at the same time Steeb was repelled. In autumn 2012, the Company bought the U.S. software company Ariba. Mid-2013, the Company bought the logistics management specialist hybris.

In the area of ​​electronic procurement systems founded SAP together with Siemens, Bosch, INA, Continental AG and ZF Friedrichshafen AG SupplyOn the joint venture. Numbers

For the previous second quarter of 2013, SAP had in the year-ago quarter at constant currency by eight percent to 4.06 billion euros. The operating profit (EBIT) rose by ten percent growth to 988 million euros, so after tax stood at a five percent Risen on 724 million Euro profit in the books. The operating margin improved 0.6 percentage points to 24.3 percent. Each share in the second quarter accounted for a profit of 0.61 euros (0.55 euros).

In the software, the software company SAP suffered a decline of three percent to 982 million euros in the second quarter of the current fiscal year. Business with Cloud subscriptions and support exploded as expected with a growth rate of 171 percent to 159 million euros. The Software segment and cloud subscription could show sales growth of seven percent, reaching a value of 1.14 billion euros.

The Hana software sales, an important engine of growth for SAP, increased 21 percent year over year in the quarter, down from 102 million euros.

Market and Competition

SAP is the global ERP market with a market share of over 25 percent (source: Gartner) as the dominant provider. Despite the adoption of J.D. Edwards and PeopleSoft, Oracle takes in this area only in second place. Other rivals in the ERP segment consist primarily of the software provider NetSuite, which specializes in on-demand solutions.

Elsewhere SAP competes with Oracle's solutions. This is especially true in the area of ​​CRM software after Oracle CRM specialist Siebel Systems took over. SAP has recently displaced Oracle CRM segment from the top position. However, SAP sees itself through the U.S. specialist Salesforce.com afflicted, who claims to have taken over the top spot in 2011.

In the area of ​​business intelligence software, SAP acquired Business Objects is consistent with its in direct competition with IBM (Cognos) and Oracle (Hyperion) and with other smaller competitors such as Micro Strategy.

With its new medium-sized and rental software "Business By Design" the company wants to gain a stronger foothold in the market for small and medium-sized customers. In HCM SAP is increasingly competing with Workday.

Outlook

SAP continues to expect full-year 2013 Hana a turnover of 650 million to 700 million euros. Instead of a growth of 11 percent to 13 percent, as previously anticipated, the Company expects in 2013, a growth of only ten percent.

Analysts expect at SAP in 2013 with a net profit of 3.38 euros per share, which is planned to increase in the following year 2014 to 3.79 Euros per share. In 2015, expected a profit of 4.26 euros per share.

Review

SAP shares recently presented in New York at 74.08 U.S. dollars friendly, so this results in a market value of around 88 billion U.S. dollars for SAP shares. In Frankfurt SAP papers were last traded at 56 euros. Based on current earnings estimates for the year 2014, a price-earnings ratio (PER) of 22 results

Analysts at Evercore Partners recently reduced their price target on shares of SAP 77 to 75 euros; said analysts currently classify the papers with "equal weight".

Analysts at Barclays Capital Rate SAP shares to "equal weight", the analysts see a price target of 55 euros for the papers.

The experts at DZ Bank see the fair value of SAP shares at only 63 Euros, at the same time confirmed the bankers their buy recommendation on the paper.

At Citigroup to "neutral" is SAP shares continue to face. The analysts continue to see a price target of 58 euros for the papers. The analysts see a danger that it might take longer for the in-memory database will be a growth in the Group.

SAP creates financial incentives for switching to the cloud

Users who want to relocate functions from existing on-premise software from SAP to the cloud can take the appropriate licenses from the future maintenance. The modalities of such a change contained in the "cloud Extension Policy" that SAP has now been published.

SAP plans to offer its customers access to their cloud solutions more palatable to financial incentives. To date, users have company for software features they want in future refer from the cloud, but have been in an on-premise installation in use, continue to pay maintenance for the license purchased version. That should change in the future, Christian Mueller; vice president of SAP explained in the section Maintenance Go-To-Market. Businesses should be able to handle the change in the future in the cloud flexible and "no longer sit on unused shelfware".

SAP software, the company previously operated as an on-premise solution and want to refer to them in future as a cloud version, customers can take in the new model of the maintenance. As the modalities and work off the bill exactly, regulates the Cloud Extension Policy, which has published for its customers in the software market place in the web of the Group. SAP itself has its own cloud portfolio continuously expanded in recent years, for example, by in-house developments such as the ERP package "Business ByDesign" or special function modules such as "Sales on Demand". In addition, the software specialists from Baden cloud solutions have purchased, such as SuccessFactors, a specialist in human capital and talent management, as well as the shopping network Ariba.

All of these cloud solutions, however, have their counterparts in SAP's on-premise world, such as human resource functions in the business suite, Supplier Relationship Management (SRM) and Customer Relationship Management (CRM). According to Müller, the use of cloud solutions for their own clientele is always interesting. Currently, developed from his point of view, especially hybrid infrastructures - mission-critical processes would continue to operate even in the most business-like, while supporting features that could be operated largely standardized, would increasingly moving to the cloud.

To avoid an expensive dual mode of cloud and on-premise solution in this environment, SAP has developed its cloud Extension Policy. This framework defines how unneeded on-premise software with new cloud capabilities will be charged. Muller admits that there may be at this point one way or another blur. For example, it is not easy, certain features of a complete package calculate out how the Business Suite. Therefore, the new policy should also be understood less as a price guide, but rather as a definition of rules as the modalities of such a change must be assessed.

Cloud control switch individually

Müller stresses in this context the benefits of the cloud, pointing out that the software-as-a-service options often offer more features as their comparable on-premise versions. At the same time the SAP manager expressed the expectation to win for their own cloud solutions using the cloud extension policy more users. The user should be able to manage their cloud migration flexibly and individually.

For example, would not all users of a specific function module are moved to the cloud. The customer can determine how many users are supposed to work in the future with a cloud version of itself. Accordingly, the expenditure for the maintenance of the reduced on-premise share diminish. SAP reportedly it does not matter which model; the customer service has been in use - the standard support or the more expensive Enterprise Support.

Businesses meet the integration and deployment of cloud solutions in highly complex IT environments, partially facing enormous hurdles, says Elaina Stergiades, research manager, IDC. "Therefore they are looking for value and use models that are flexible and an extension to the cloud at their own pace allow," said their assessment. The SAP model can help to optimize investment in on-premise and cloud it.

Cloud fraction on SAP business grows

For the German software giant cloud business will total more important. In the second quarter of 2013, SAP took with cloud subscription and support a 159 million euro, which is three times as much as in the same period last year. At the same time, the traditional software business declined by seven percent to 982 million euros. Thus, the cloud is now a share of almost 14 percent on product sales. However, it remains to be seen how the new policy affects cloud to the post in support of the SAP footprint.

This came in the most recently completed quarter to nearly 2.18 billion euros - up eight percent compared to the second quarter of 2012 - and so did the lion's share of the total revenues of more than four billion euros. The SAP executives go, however, do not assume "that this offer will have a significant impact on the forecast of the SAP sales and operating profit forecast for the year 2013," says an official release.

Recently however, there was some concern about SAP cloud Department. Their manager Lars Dalgaard, ex-chief of the acquired SAP cloud specialists SuccessFactors, announced in late June from his executive position cloud. We were told, Dalgaard SAP will continue to advise you. Insiders report, however, that there are two different views of corporate culture clashed and the native Dane finally had to go. In April 2011, had the come of Oracle John Wookey, who should drive the development of various cloud modules approved by SAP. Now to take the threads of SAP's cloud business into the hands of technology and development chief Vishal Sikka.

SAP users welcome the initiative and hope for more

The SAP User welcome the recent initiative of its software supplier. The decision to make the SAP license model at this point flexible, lay a concrete demand DSAG basis, it was the part of the German-speaking SAP User Group (DSAG) "We have long urged that companies operating in the want to develop into cloud must not hold on to their licensing costs, "said board member Andreas DSAG Oczko the SAP announcement. Rather, it should be possible to liquidate the superfluous by the cloud functionality licenses. SAP have drawn the right conclusions in terms of SAP customers.

For the DSAG it is a step in the right direction to the first stones to vacate at the SAP customers in the way that might have been difficult for an investment in cloud solutions, determine the user agent. Moreover, it is a success, the ansporne, "together with SAP further potential for improvement to work out in the license area, to discuss and come to transferable results, to further promote the innovation of all SAP customers with SAP solutions." DSAG urging for some time on the license conditions more flexible overall stronger. So far, the SAP management had, however, turned a deaf ear to ear this.