In a preliminary announcement of its fourth-quarter 2007 results, enterprise applications giant SAP said it expects a double-digit jump in software and related services revenue for the period ended Dec. 31.
In advance of its official announcement on Jan. 30, SAP today said it expects fourth-quarter software and related services to be approximately €2.48 billion, up from €2.20 billion in the prior-year quarter, a 13% increase. Software revenue alone will account for approximately €1.41 billion, SAP said, a 14% increase compared with the same period in 2006.
Total quarterly revenue is expected to be €3.25 billion, up 10% from €2.95 billion in the fourth quarter of 2006.
The enterprise applications leader approximates that full-year software and related services revenue will come in at roughly €7.44 billion, an increase of 13% over 2006, with €3.40 billion in software revenue alone, also a 13% improvement.
Total revenue for 2007 will be approximately €10.26 billion, up from €9.40 billion in 2006, an increase of 9%.
SAP did not provide information on net earnings for the quarter, and declined today to comment on the preliminary results.
In a continuation of its recent strong performance in the Asia-Pacific region, including Japan, SAP expects the region's fourth-quarter software and related services revenue to be approximately €300 million, a 27% year-over-year increase. The company expects the full-year regional figure to be €960 million, a 19% improvement.
SAP's performance in the Americas wasn't nearly as strong. Software and related services quarterly revenue in the Americas is expected to be €780 million, an increase of 7% over the like period in 2006. For the full year, the region is expected to have yielded approximately €2.50 billion in software and related services revenue, a 9% improvement over the prior year.
In the Europe, Middle East, and Africa (EMEA) region, SAP said quarterly software and related services revenue will be approximately €1.40 billion, up 13% year over year, while the region will bring in approximately €3.98 billion for the year, also a 13% increase.
For its part, SAP chief rival Oracle reported strong results in its most recent quarter, which saw the company's applications new license revenue grow by 63%.
"Overall, it was a great quarter" for most of the major ERP vendors, according to Forrester Research analyst Ray Wang. Some industry observers' perception that the enterprise applications market is shrinking misses the fact that many companies are in the midst of broad replacement strategies for legacy systems, Wang told Managing Automation.
Although many businesses are beginning to consolidate around key vendors, Wang said, there remain many sales opportunities for the major vendors, particularly in the mid-market. AMR Research recently predicted an average spending increase of 5.1% by mid-market companies; 48% are expected to increase their ERP budgets in 2008.
Aside from replacing older systems, Wang said, SAP and others may continue to see market expansion among large enterprises as corporate users start to view IT purchases as part of larger business strategies and become directly involved in the deals. "At the end of the day, there is money being opened up for investment," Wang said, as companies ramp up operational efficiency initiatives and apply a streamlined and federated approach to expanding global operations.
SAP said it expects its full-year 2007 operating margin to total approximately 26.5%, compared with 27.3% in 2006, noting that the 2007 operating margin was held down by accelerated investment activity for its new on-demand mid-market product, Business ByDesign.
SAP previously announced that its first Business ByDesign client went live last September, and SAP CEO Henning Kagermann, while discussing the company's third-quarter 2007 results in October, said SAP was aiming for 100 live clients by the end of 2007. He also said the company hopes Business ByDesign will be profitable by the end of 2008.
In a separate announcement, business process management provider and SAP channel partner IDS Scheer yesterday said it had signed a memorandum of understanding with SAP to become one of the early resellers of Business ByDesign.