SAP SE ORD NPV (OTCMKTS:SAPGF) is due to release its full 1Q2016 results by April 20, but the company recently revealed that its sales would miss analyst estimates. The company stated that some of its deals, in the Americas region, had slid into the next quarter, which would mean a lower earnings forecast. SAP has also reiterated its earnings forecast for the FY2016.
One major take away from the recent release was that the company’s cloud subscription and support revenue reported a 33% increase. As such, revenues for the quarter recorded a 5.1% increase, to 4.73 billion Euros, compared to analyst estimates of 4.82 billion. Similarly, operating profit was reported at 1.1 billion Euros, compared to 1.15 billion expectations from analysts.
The CEO of SAP, Bill McDermott, clarified that the contracts were signed in April, much later than was initially anticipated, laying the foundations for a strong 2Q2016, but missing the current forecast. He also compared the expansion of SAP’s profitability, with that of Oracle, and stated that his company was being more efficient about the matter. It should be noted here that Oracle is also switching to allow companies to use its programs as cloud based services.
Provided the currencies remain stable, SAP anticipates that it could possibly earn 6.7 billion Euros, as compared to its initial forecast of 6.4 billion. The company is also improving its operating margins, by changing its business model from selling software, to selling subscriptions. As such, the CEO has also received a 5-year extension in his contract, solidifying his position up to 2021. Added to this, the CEO is also focused on making the company less reliant on reselling database software. As such SAP has several new products scheduled for launch, which should boost company sales. SAP’s software license segment was particularly seen as a red-zone for the company, as sales for the segment declined by 13%.
SAP SE ORD NPV (OTCMKTS:SAPGF) lost 3.32% during the April 8 trading session, to reach a close at a share price of $75.76.