SAP Shares Dragged Down by Slower Than Expected Cloud Sales
Sales for the quarter ending in June rose 4.1 billion euro and earnings per share were 73 euro cents. The results were shy of the 75 euro cents and 4.2 billion euro that analysts had estimated.
SAP blamed a difficult environment for IT spending, especially in the Asia-Pacific region, plus a strong adoption cycle of its cloud products in the U.S. that is weighing down its traditional ERP software product line.
In a note to clients today, BMO analyst Karl Keirstead noted that even the cloud product, known as HANA, accounted for sales that were much weaker than expected. HANA sales at 102 million euro were off by 21 percent from the 160 million euro Keirstead had expected. “In our view, this is a disappointment and requires a huge 2H13 performance for SAP to hit the high end of its reaffirmed guidance for HANA in 2013.” Keirstead trimmed his estimate for the year, saying he now expects SAP to sell 675 million worth of HANA products in 2013, down from his previous estimate of 766 million euro.
One issue, he said, is that customers aren’t seeing the return on investment they had hoped for after deploying HANA. “During our field checks, we’ve also spoken to SAP customers that have already fine-tuned SAP’s BWA product and didn’t see the ROI from a conversion to HANA.” Update: Keirstead was referring to a specific segment of the HANA product line known as BWA or Business Warehouse Accelerator, which amounts to only a small portion of its overall HANA revenue, not the whole thing. So when the customers he talked to complained about not seeing the ROI they expected, they were referring to the BWA product, and just the BWA product. Got that?
All told, Keirstead trimmed his earnings estimates on SAP for 2013. He now expects it to earn 3.44 euro, down from 3.48 previously, on sales of 17.27 billion euro, down from a prior forecast of 17.52 billion euro.
SAP shares were lower by more than one percent in pre-market trading today.