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SAP Growing Through Acquisitions

Posted on Tuesday, Jun 24th 2014

According to a recent Gartner report, the worldwide Enterprise Software Market grew 3.8% in 2013 to $25.4 billion, registering a minor improvement compared with the 2.2% growth registered in 2012. SAP was the leader in the market with 24% share followed by Oracle’s 12% share.

SAP’s Financials
Market leader SAP (NYSE: SAP) saw first quarter revenues grow 6% over the year to €3.7 billion (~$5.1 billion), in line with market estimates. EPS of €0.56 (~$0.77) was ahead of the Street’s projections of $0.62 for the quarter.

By segment, software and support revenues grew 7% to €2.8 billion (~$3.9 billion) and revenues from cloud subscriptions and support grew 38% to €221 million (~$3.03 million).

SAP reaffirmed their current year forecasts and projected the current year’s cloud subscriptions and support services revenues of €0.95 billion-€1.00 billion (~$1.28 billion-$1.34 billion). They expect to end the year with software and software related services growing 6%-8% over the year from previous year’s €14.03 billion (~$18.9 billion), which translates to overall revenues of €15.83 billion-€16.15 billion (~$21.3 billion-$21.8 billion).

SAP’s Acquisitions
SAP continued to build their product portfolio through acquisitions. Recently, SAP announced the acquisition of real-time behavioral marketing company SeeWhy. SeeWhy is a leading provider of behavioral marketing solutions that help deliver real-time one-to-one marketing campaigns using multiple digital media including email, and advertising across desktop, mobile, and social channels. SeeWhy’s solutions analyze the customer’s behavior to personalize marketing campaigns and thus make them more relevant to the user. Their offerings are estimated to improve conversion and deliver improved return on investments. SAP plans to integrate SeeWhy’s solutions with their Hybris e-commerce platform to deliver enhanced one-to-one personalized marketing campaigns. The terms of the acquisition were not disclosed.

Last quarter, SAP also acquired vendor management systems provider Fieldglass for an estimated $1 billion. Fieldglass’ tools help organizations manage their employee and supplier relationships. Their cloud-based Vendor Management System will help meet the growing demand of managing flexible workforces. Using their tools, organizations can quickly employ and manage temporary labor force to support business and customer needs. The acquisition is expected to complement the existing capabilities of SAP’s Ariba and SuccessFactors. Post the acquisition, SAP’s existing customers will be able to manage suppliers and both in-house and external contracted employees. Analysts peg the contingent labor and statement-of-work services market to be worth $3.3 trillion as more and more companies are resorting to variable operating models. Contingent workforces are projected to grow by 30% over the next three years. The acquisition will help SAP address this high-growth market.

SAP’s Expanding Offerings
SAP has also been extending the deployment of SAP HANA to other fields. Recently, they entered into a strategic collaboration with Stanford School of Medicine to deploy SAP HANA in conducting research regarding the contribution of genetics, environmental exposures, behavior, and other factors to disease susceptibility. SAP also announced participation in the Global Alliance for Genomics and Health to deploy their technology in sharing and analyzing large amounts of genomic and clinical data.

SAP’s stock is trading at $78.31 with a market capitalization of $93.5 billion. It touched a 52-week high of $87.42 in December last year.

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