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MarketScreener Homepage  >  Equities  >  Xetra  >  SAP AG    SAP   DE0007164600


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SAP's Cloud Offering Gets Boost From Rival Microsoft

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10/21/2019 | 05:01am EST

By Sara Germano

BERLIN--SAP SE (SAP.XE) on Monday unveiled a new partnership with competitor Microsoft and said that the alliance had already helped drive cloud services sales in the latest quarter, just over a week after the German business-software maker announced an abrupt leadership change.

The partnership makes Microsoft the preferred go-to-market partner through which SAP will help customers upgrade from on-premises enterprise software and transition to cloud--or remotely hosted--applications.

Financial terms of the deal weren't disclosed, but the new three-year agreement was finalized during the quarter ended Sept. 30 and contributed 18 percentage points to SAP's 39% growth in new cloud bookings for the period.

Shares of SAP at 0842 GMT were up 1.1% at 117.06 euros ($130.69).

The agreement underscores SAP's continuing work to transform itself from a traditional business software giant to a provider of cloud services.

Many professional software developers are turning themselves into services providers, moving from one-off sales of software licenses to rental or subscription models in an effort to both boost and smooth out once lumpy revenues and profits. Such transitions can result in a temporary hit to profits as investments and acquisition costs increase in the short term.

SAP's own transition led to restructuring at the beginning of the year and hastened an update to its long-term outlook as U.S.-based activist investor Elliott Management Corp. revealed in April a EUR1.2 billion ($1.3 billion) stake in SAP.

Earlier this month, the company said its longtime Chief Executive Bill McDermott would step down, effective immediately, and promoted two internal executives, Jennifer Morgan and Christian Klein, as his replacement without providing an explanation for the change.

Asked on Monday if she has had any communication with Elliott since her appointment, Ms. Morgan said she and Mr. Klein are "looking forward to speaking with all our customers and shareholders" at SAP's special capital markets day next month.

Ms. Morgan is the first female executive to lead a member of Germany's DAX-30, the Frankfurt stock exchange's blue-chip stock index.

"It's been quite an honor," she said of the milestone, "but there's certainly more we can do."

At the time of its leadership announcement earlier this month, SAP pre-released its third-quarter earnings report. Revenue rose 13% to EUR6.8 billion, while operating profit jumped 36% to EUR1.7 billion. Cloud-based revenue grew 37% to EUR1.8 billion.

As SAP continues to transition to cloud-based services it has taken on several partnerships and collaborations with competitors. In May, it launched its collaboration project, Embrace, with Microsoft, Google Cloud, and Amazon Web Services to facilitate software customers' move to the cloud. Both SAP and Microsoft have partnered on offering cloud-based services dating back to 2017.

Write to Sara Germano at sara.germano@wsj.com

Stocks mentioned in the article
ChangeLast1st jan.
DAX -1.05% 13083.84 Delayed Quote.25.21%
MICROSOFT CORPORATION 0.03% 150.39 Delayed Quote.48.07%
SAP AG -0.95% 121.48 Delayed Quote.41.10%
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Financials (EUR)
Sales 2019 27 600 M
EBIT 2019 8 207 M
Net income 2019 3 489 M
Debt 2019 9 093 M
Yield 2019 1,25%
P/E ratio 2019 39,8x
P/E ratio 2020 28,4x
EV / Sales2019 5,63x
EV / Sales2020 5,13x
Capitalization 146 B
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Technical analysis trends SAP AG
Short TermMid-TermLong Term
Income Statement Evolution
Mean consensus OUTPERFORM
Number of Analysts 36
Average target price 132,64  €
Last Close Price 122,66  €
Spread / Highest target 24,7%
Spread / Average Target 8,14%
Spread / Lowest Target -29,1%
EPS Revisions
Christian Klein Co-Chief Executive Officer
Jennifer B. Morgan Co-Chief Executive Officer
Hasso Plattner Chairman-Supervisory Board
Luka Mucic Chief Financial Officer
Juergen Mueller Head-Innovation & Technology
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