SAP Earnings: Upbeat, Talks Up Analytics, Cloud Amid Q1 Miss

Making a case that it is growing while other IT companies are languishing, William McDermott, SAP’s (NYSE: SAP) co-chief executive, defended the German software giant’s revenue and earnings miss in Q1 2013 by calling it a “solid start to 2013.” 

For Q1 2013, SAP posted earnings of $680.4 million, up 17 percent from a year ago, on revenue of $4.71 billion, a 7 percent uptick from the $3.35 billion it posted the same time last year. Per share earnings rose 19 percent to 58 cents. Those figures, however, lagged behind how financial analysts' estimated the company would perform for the period.

The developer said it experienced 50 percent growth in the Americas and 13 percent growth in EMEA for the quarter but its Asia Pacific sales flagged when key sales managers left the company early in the quarter and it could not compensate for the disruption.

SAP top brass, rather than characterizing the quarter as disappointing, instead portrayed it as successful. Indeed, McDermott, speaking on an analysts’ conference call, said that with $1 billion in software and cloud subscription it was the company’s “best first quarter ever,” with growth “primarily driven by stronger-than-expected growth in HANA and cloud revenues.”

HANA, SAP’s in-memory software to speed up data operations, proved to be a major trigger to the company’s revenue for the quarter, tripling year-over-year to add more than $112 million to the vendor's software sales for the period. SAP also said that it recorded double-digit growth in its mobile business.

McDermott said that the 14 percent rise in software and software-related services amounted to the developer’s 13th consecutive quarter of double-digit growth in that segment. But it’s the cloud where SAP made hay, posting a whopping 385 percent year-over-year increase in cloud subscription and support sales and a 95 percent jump in deferred revenue from cloud subscriptions and support.

“It is clear that many application categories are increasingly transitioning to the cloud, and SAP is in the forefront of this transition,” he said.

In reiterating SAP’s 2013 guidance, McDermott pointed to the company’s history. “To put Q1 performance in perspective, historically, Q1 has been the smallest quarter for us. Our pipeline for Q2 and the remainder of the year is very strong. We have the right portfolio of solutions to take advantage of the market dynamics, and we are confident that we will achieve our outlook for 2013.”