SAP Forecasts $7 Billion Revenue From New Businesses by 2015

May 18, 2011, 11:26 AM EDT By Ragnhild Kjetland

(Updates with analyst comment in fourth paragraph, Amazon, Microsoft deals in fifth.)

May 18 (Bloomberg) -- SAP AG, the largest maker of business management software, predicts mobile products, services and real-time analytics technology will generate about a quarter of its projected 20 billion-euro ($28.5 billion) in sales by 2015.

“Mobility and in-memory technology will be the two main drivers of growth for SAP,” John Chen, chief executive officer of Sybase, which SAP bought last year for $5.8 billion, said in an interview in Orlando, Florida. “If you look at the whole 20 billion euros, I think the last 5 billion euros is going to rely on these two functions.”

While archrival Oracle Corp. has spent more than $42 billion on takeovers since the beginning of 2005, SAP will meet the revenue target even without acquisitions as it pitches mobile solutions and the Hana real-time analytics product to current customers, co-CEO Jim Hagemann Snabe said in an interview at the company’s annual Sapphire conference.

“The first impression is for sure that this is a very ambitious goal,” said Tobias Ortwein, senior vice president at Pierre Audoin Consultants in Munich. “We expect also a portion of inorganic growth within this revenue goal.”

SAP, based in Walldorf, Germany, announced to a deal with Amazon.com Inc. to make a series of its software offerings available to customers on demand via Amazon.com’s cloud- computing Web Services. SAP and Microsoft Corp. also agreed to tighten the integration of their computer offerings that deliver and store software over the Internet.

Cloud Demand

The global market for cloud-related services may rise to $148.8 billion in 2014 from $68.3 billion in 2010, according to researcher Gartner Inc. in Stamford, Connecticut. The biggest makers of cloud software include Salesforce.com Inc. and SuccessFactors Inc. Companies like Amazon and Dell Inc. operate servers on which the on-demand software runs.

Earlier this month, SAP’s head of global solutions, Sanjay Poonen, said a recent outage on Amazon’s cloud-computing services, and a controversy around Google Inc.’s delays in providing e-mail services to 30,000 city employees in Los Angeles could make it harder for the software industry to convince clients that cloud computing is secure.

SAP slid 14.5 cents, or 0.3 percent, to 43.46 euros at 2:31 p.m. in Frankfurt. The stock has gained 14 percent this year, giving the company a market value of 53.3 billion euros. Redwood City, California-based Oracle is up 8.4 percent.

Build or Buy?

Since co-CEOs Snabe and Bill McDermott took the helm from now Hewlett-Packard CEO Leo Apotheker in February last year, they have pursued a three-pronged strategy of making SAP software available on-premise, on-demand and on-device.

In 2010, SAP reported total revenue of 12.5 billion euros. Sybase made about “half a billion dollars” on the mobile solutions, according to Chen.

“That is our carrying strategy for 2015,” Snabe said. “I know this industry well enough that between now and 2015 there’ll suddenly be new opportunities that we don’t know today. Then we will make the call again: is it best to build or is it best to acquire?”

SAP has made only two large acquisitions in its 39-year history: Sybase, and business-intelligence company Business Objects for 4.8 billion euros in 2007.

The German company delayed the sale of its on-demand solution Business ByDesign by two years and has so far won 500 customers. According to Snabe, so long as the average number of users per company is between 80 and 100, Business ByDesign will be “as profitable” as the rest of the business.

SAP targets a 35 percent profit margin by 2015. In 2010 it was 32 percent. The average number of users among the 500 ByDesign customers is 25, and would be less profitable and weigh on the group margin, Snabe said.

--Editors: Kenneth Wong, Heather Harris

To contact the reporter on this story: Ragnhild Kjetland in Orlando, Florida via rkjetland@bloomberg.net

To contact the editor responsible for this story: Kenneth Wong in Berlin at kwong11@bloomberg.net

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