SAP Says Covid May Continue to Squeeze Sales This Year
(Bloomberg) -- SAP SE’s attempt to accelerate moving customers to cloud-based software began to see signs of success, although the company warned sales will continue to be impacted by the effects of the coronavirus pandemic.
The corporate software maker said 2021 cloud and software revenue, excluding some items, will be as much as 23.8 billion euros ($28.9 billion) in constant currency. When currency is adjusted, revenue may fall as much as 4% from a year earlier, Walldorf, Germany-based SAP said late Thursday in a statement.
“This outlook assumes the Covid-19 crisis will begin to recede as vaccine programs roll out globally, leading to a gradually improving demand environment in the second half of 2021,” the company said.
Shares in SAP were up 1% in early trading on Friday.
SAP has spent years attempting to move away from legacy software that resides in clients’ computer servers, to cloud-based software, which is delivered over the internet. Chief Executive Officer Christian Klein is trying to develop such software, after his predecessors relied on acquisitions to do so. SAP has seen uneven results in this modernization effort and the company has twice in the past year warned that the pandemic would stymie client deals.
Most notably, SAP’s shares crashed in November, falling 21%, the biggest intraday fall since 1999, after it cut its revenue forecast for the full year and warned the pandemic would hurt demand. Klein said at the time that the pandemic will delay SAP’s goals for revenue by one or two years.
The latest results show a “slight improvement” in new license sales, but it is too early to call a turnaround, according to Bloomberg Intelligence analyst Anurag Rana. Cloud sales in North America and Europe beat SAP’s expectations, as well as software licenses.
SAP, which was set to report earnings later this month, said fourth-quarter revenue declined 6% to 7.54 billion euros, in line with analysts’ average estimate of 7.5 billion, according to data compiled by Bloomberg.
SAP reiterated that it expects limited growth and margin improvement over the next two years, and moved expectations to meet its 2023 strategy plan out to 2025.
Demand for Qualtrics, the U.S. customer-survey software business that SAP is planning to list this year, was also strong, Berenberg analyst Andrew DeGasperi wrote in a note. In December Qualtrics filed for what could be one of the first U.S. initial public offerings of 2021, just over two years after it was acquired by SAP.
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