SAP Suffering from Foot in Mouth Disease (ORCL, SAP)

Includes: ORCL, SAP
by: William Trent, CFA

Oracle (NASDAQ:ORCL) investors were thrilled to learn last month that the company is finally digesting the slew of acquisitions it has made and was able to post fantastic growth on both an organic and acquisition-enhanced basis. SAP (NYSE:SAP), however, is now having to digest a foot it put in its mouth.

After Oracle’s announcement, SAP confidently assured the world that they were out kicking Oracle’s butt.

Steve Bauer, an SAP spokesman, said his company was winning deals from Oracle, however, and that the picture would be more clear when SAP reports quarterly earnings on July 20. He added SAP’s strong showing in the United States over the past few years reflected a global trend.

Fast forward to yesterday’s pre-announcement of the July 20 results.

SAP AG’s American shares sank in premarket trading Thursday after the software maker said license revenue will come in lower than Wall Street had been hoping for.

The Walldorf, Germany-based company reported licensing revenue from its programs is expected to rise 8 percent to $790 million during the second quarter, and confirmed its outlook for higher product and software revenue. Analysts had been expecting higher sales from the company.

Shares fell $3.76, or 7.5 percent, to $46.58 in premarket trading on the INET electronic exchange, after closing Wednesday at $50.34 on the New York Stock Exchange.

The disappointing outlook weighed on other technology stocks. Competitor Oracle Corp. shares gave up 34 cents, or 2.4 percent, to $13.88 on INET, after closing Thursday at $14.22 on the Nasdaq.

Hmm. Now it is “more clear.” Oracle is posting 57 percent organic license growth and SAP is doing 8 percent. The news was well worth the wait. More and more, SAP appears to be living up to its name.

ORCL-SAP 1-yr comparison chart:

ORCL-SAP 1-yr comparison chart