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SAP software makes loads of money

by on20 July 2016


High-margin and classy packaging

The maker of expensive esoteric business software, which no one really understands, is continuing to make loads of money.

SAP saw unexpectedly strong growth in high-margin packaged software licenses which means it is on track to make pots of money this year.

Second quarter operating profit, excluding special items, rose 9 percent to 1.52 billion euros, beating average analysts' expectations of 1.45 billion euro.

SAP serves up its high margin business software to the world's biggest multinational corporations. It tends to look after accounting, human resources and supply-chain management where there are a lot of jargon words and a need for software which does things that no-one outside that department can explain.

It does have a few rivals. There is Oracle, IBM, Salesforce, and Workday, but SAP has been doing the heavy lifting in the networking arena for years.

Cloud software, which is delivered via the Internet, has lower profit margins than packaged products, of which SAP sold more in the second quarter.

But software licenses rose by 10 percent to 1.04 billion euro, excluding the effect of foreign exchange rates. Analysts were expecting a rise by only 1.8 percent to 997 million euro.

Oracle, IBM and Microsoft also recently reported better-than-expected results, saying their cloud strategies were paying off.

SAP's non-IFRS operating margin rose to 28.9 percent in the second quarter compared with 23.4 percent in the first quarter of 2016 and 28 percent in the second quarter of last year.

The company said it still expected full-year operating profit to come to between 6.4 billion and 6.7 billion euro.

SAP's Chief Executive Bill McDermott told journalists that SAP shrugged off Britain's decision to leave the European Union as that was expected.

Last modified on 20 July 2016
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