SAP’s new numbers and strategy

With its annual conference to report full-year fiscal results, SAP AG unveiled its “new game changing approach to the mid-market.” First and foremost has SAP developing a hosted suite of business applications for the midmarket, in hopes of “attract[ing] an untapped segment of customers with the promise of faster implementation and lower ownership costs.”

Seeking to complement SAP’s extant portfolio for midsize companies, the solution will leverage a new “enterprise service-oriented architecture (enterprise SOA) by design” platform.

At the conference, SAP CEO Henning Kagermann sketched some plans to introduce the new midmarket solution with offers of “breakthrough innovations in faster, lower-risk implementation, continuous adaptability and easier user adoption.”

The solution is beginning initial market validation, and SAP plans to introduce more details about the product road map and its associated components at an event later in the current quarter, though speculation doesn’t have the product released until 2008.

Earlier this month, SAP introduced the enterprise SOA-based version of its SAP All-in-One solutions to appeal to its established base of midsize companies, which company numbers state make up almost two-thirds of SAP customers.

According to Kagermann, SAP will invest in an additional business model to support the introduction of the web-based product to reach the untapped market.

SAP formed a global SME unit in November 2006, headed by Hans-Peter Klaey. SAP Global SME is an organizational unit overseeing sales, marketing, operations and alignment of resources dedicated to serving the SME folks.

At the time of the unit’s formation, SAP stated that the formulation “reflects the evolution of SAP’s go-to-market model to serve customers in increasing numbers through a multi-channel approach” and that the company “is aggressively expanding its footprint in the segment by building its delivery channels and the world’s largest portfolio of business management software designed specifically to meet the market, industry and resource requirements of small and midsize businesses.”

Kagermann was quoted on the subject in Computer World thusly: "There is no such thing on the market now, and SAP is going to write a bit of software history.”

What’s that? “Show me the money,” you say? Sure thing!

Figures from SAP’s accounting folks included:

• Product revenues for the fourth quarter of 2006 were €2.2 billion (approximately $2.86 billion), an increase of 8 percent compared to the same period in 2005.

• Software revenues for the quarter were €1.3 billion (approximately $1.69 billion), an increase of 7 percent.

• Total revenues were €3.0 billion for the fourth quarter of 2006 (approximately $3.89 billion), an increase of 7 percent.

• Operating income for the fourth quarter of 2006 was €1.1 billion (approximately $1.4 billion), an increase of 10 percent compared to the fourth quarter of 2005.

• The operating margin for the quarter was 36.6 percent, an increase of 1.0 percent. The adjusted operating margin for the quarter was 37.7 percent, an increase of 0.9 percentage points.

• Net income for the 2006 fourth quarter was €799 million (approximately $1.037 billion), or €0.66 (approximately $0.86) per share, an increase of 29 percent. Fourth quarter 2006 adjusted net income was €822 million (approximately $1.067 billion), or adjusted €0.67 (approximately $0.88) earnings per share, an increase of 28 percent.

• Product revenues increased to €6.6 billion (approximately $8.5 billion) for the year ending December 31, 2006, an increase of 11 percent.

• Software revenues increased 10 percent to €3.1 billion (approximately $4.0 billion) in 2006.

• Total revenues were €9.4 billion (approximately $12.2 billion) for the year, an increase of 10 percent compared to the same period last year.

A full replay of SAP’s earnings conference is available at www.sap.com/investor.

SAP currently claims more than 38,000 customers in 26 industries (including high tech, retail, financial services, healthcare and the public sector) in more than 120 countries.