SAP's Cloud Offering Gets Boost From Rival Microsoft
21 October 2019 - 8:15PM
Dow Jones News
By Sara Germano
BERLIN--SAP SE (SAP.XE) on Monday unveiled a new partnership
with competitor Microsoft Corp. (MSFT) and said that the alliance
had already helped drive cloud services sales in the latest
quarter, just over a week after the German business-software maker
announced an abrupt leadership change.
The partnership makes Microsoft the preferred go-to-market
partner through which SAP will help customers upgrade from
on-premises enterprise software and transition to cloud--or
remotely hosted--applications.
Financial terms of the deal weren't disclosed, but the new
three-year agreement was finalized during the quarter ended Sept.
30 and contributed 18 percentage points to SAP's 39% growth in new
cloud bookings for the period.
Shares of SAP at 0842 GMT were up 1.1% at 117.06 euros
($130.69).
The agreement underscores SAP's continuing work to transform
itself from a traditional business software giant to a provider of
cloud services.
Many professional software developers are turning themselves
into services providers, moving from one-off sales of software
licenses to rental or subscription models in an effort to both
boost and smooth out once lumpy revenues and profits. Such
transitions can result in a temporary hit to profits as investments
and acquisition costs increase in the short term.
SAP's own transition led to restructuring at the beginning of
the year and hastened an update to its long-term outlook as
U.S.-based activist investor Elliott Management Corp. revealed in
April a EUR1.2 billion ($1.3 billion) stake in SAP.
Earlier this month, the company said its longtime Chief
Executive Bill McDermott would step down, effective immediately,
and promoted two internal executives, Jennifer Morgan and Christian
Klein, as his replacement without providing an explanation for the
change.
Asked on Monday if she has had any communication with Elliott
since her appointment, Ms. Morgan said she and Mr. Klein are
"looking forward to speaking with all our customers and
shareholders" at SAP's special capital markets day next month.
Ms. Morgan is the first female executive to lead a member of
Germany's DAX-30, the Frankfurt stock exchange's blue-chip stock
index.
"It's been quite an honor," she said of the milestone, "but
there's certainly more we can do."
At the time of its leadership announcement earlier this month,
SAP pre-released its third-quarter earnings report. Revenue rose
13% to EUR6.8 billion, while operating profit jumped 36% to EUR1.7
billion. Cloud-based revenue grew 37% to EUR1.8 billion.
As SAP continues to transition to cloud-based services it has
taken on several partnerships and collaborations with competitors.
In May, it launched its collaboration project, Embrace, with
Microsoft, Google Cloud, and Amazon Web Services to facilitate
software customers' move to the cloud. Both SAP and Microsoft have
partnered on offering cloud-based services dating back to 2017.
Write to Sara Germano at sara.germano@wsj.com
(END) Dow Jones Newswires
October 21, 2019 05:00 ET (09:00 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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