LONDON — Saying that it has grown its business in double digits across all of its major geographic areas, SAP AG today reported that net income for the second quarter ended June 30 grew 8% on a 10% increase (14% in constant currencies) in total revenue to €2.42 billion.
The enterprise software market leader said that software and software-related service revenue rose 16% (19% in constant currencies) to €1.71 billion, compared with €1.48 billion in the second quarter of 2006. Software revenue alone jumped 18% (21% in constant currencies) to €715 million, compared with €604 million in the prior-year period.
Although growth in SAP's three key geographic areas — the Americas; Europe, Middle East, and Africa (EMEA); and Asia-Pacific and Japan — reached double digits in the second quarter, software and related services revenue in the U.S. market was only up 4% (11% in constant currencies) to €417 million. Nevertheless, SAP officials said they were not concerned, noting that, in constant currencies, the second quarter represented the 19th consecutive quarter of double-digit revenue growth in the U.S. market.
"The U.S. market is coming off a long period of significant growth," said Leo Apotheker, deputy chief executive, in remarks to financial analysts today. "It is slowing down, but there is nothing sinister about it."
The strongest area of growth for SAP during the quarter, and the area that SAP officials call their "main growth driver," is Asia-Pacific and Japan. Software and software-related service revenue in the second quarter from this region grew 24% (29% in constant currencies) to €222 million, from €179 million. The EMEA region remains SAP's largest, bringing in €916 million in software and related service revenue, up 16% in the second quarter. The Americas region, including the United States, accounted for €569 million, up 12% year over year.
At a press conference today in London, SAP officials further discussed their plan for a new mid-range product, code-named A1S, and provided an update on a lawsuit filed by Oracle over the alleged theft of intellectual property by SAP subsidiary TomorrowNow.
SAP Chief Executive Henning Kagermann said that A1S will officially launch in September under a new, formal name. He said the introduction will not be a traditional product launch, but will be a phased-in rollout of a new business for SAP. The company announced earlier this year that it would invest €300 million to €400 million in the A1S initiative.
"We've never done one like this before in our history," Kagermann said, referring to the September launch. "It is a new business, a new product, new technology, a new market, and new customers. And we want to go for huge volumes."
Asked by Managing Automation whether he expects the mid-range product to also be attractive to enterprise customers, Kagermann said there will be some "immediate advantages" for large companies.
"Clearly we will leverage some of the innovation for large clients," Kagermann said. "There are immediate advantages for large enterprise clients because they see an attractive offering for their subsidiaries. They see an opportunity to link and integrate suppliers. We will see over time how we will do this." Apotheker added, "Over the next two to three years, enterprise customers want to see a step-by-step evolution."
On the Oracle lawsuit, Kagermann said during the press conference that the next step will occur on Sept. 4, when lawyers from both sides will meet with the court. He also disclosed that a number of TomorrowNow employees have been dismissed and one manager has been suspended over the matter. SAP admitted earlier this month that, based on an internal investigation, employees at its TomorrowNow subsidiary made "some" inappropriate downloads of Oracle software. SAP declined to disclose the names of the dismissed and suspended employees.
SAP also announced that in the second quarter it signed what it calls a Global Enterprise Agreement with Colgate-Palmolive and Hitachi. Companies that sign these agreements, according to SAP, have decided to standardize on SAP software and use significant numbers of SAP products. There are now seven such agreements, Apotheker said.