Software Giant SAP Shows Signs That Revamp Is Bearing Fruit
raised its earnings outlook as strong growth in cloud-based software drove a 22% increase in fourth-quarter profit, beating analysts’ estimates.
The Walldorf, Germany-based company reported its first results under its new leadership, after longtime Chief Executive
were appointed co-CEOs in October.
The solid results cap a tumultuous year for one of Europe’s most valuable technology companies, as it shifts customers away from on-site business software toward cloud-based solutions.
Facing stiff competition from Amazon.com Inc.,
and others, SAP launched a restructuring effort a year ago, shedding 4,400 jobs and costing an estimated €800 million to €950 million ($882 million to $1.05 billion).
SAP on Tuesday said net profit rose to €2.18 billion in the three months to Dec. 31 from €1.79 billion a year earlier.
Encouraged by a 32% increase in cloud revenue in the fourth quarter, SAP lifted its sales outlook for 2020 around 2% to as much as €29.7 billion. It also raised its profit target to up to €9.3 billion from a previous estimate of €9.1 billion.
New cloud bookings rose 17% in the quarter, as cloud revenue rose to €1.9 billion from €1.4 billion a year earlier. However, that business still trailed traditional software licenses and support, which generated €4.95 billion, up 1%.
“We have great expectations for continued efficiency gains and expansion of our profitability in 2020,” said Chief Financial Officer
on a conference call.
Despite the results, SAP shares were down 1.3% in early trading Tuesday.
In April 2019, activist hedge fund Elliott Management disclosed a €1.2 billion stake in SAP, worth about 1% of the company. Also that month, SAP announced a comprehensive review of its efforts to boost profit for shareholders, targeting an annual dividend payout ratio of at least 40% of profit.
—Mauro Orru contributed to this article.
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