No New News From SAP Has Investment Analysts Worried

Dennis Byron submits: Except among investment analysts, no news is good news. For investment analysts, no news brings out the worry beads. So it seems with SAP (SAP).

Investment analysts were all over on-target Q3 results and slightly improved full year guidance from SAP at an October 18 quarterly conference call. They peppered SAP executives with number-crunching questions, picking apart changes in expectations by row and column. For example, compare license revenue in the Americas but back out last year’s $31M reversal? What about Business By Design [BBD] capital expenses vs. milestones announced two years ago? Wasn’t Germany soft? (yeah, it was summer in the Northern Hemisphere in Europe). But if full year 2007 is going to be x-metric better than 2006, doesn’t that mean Q4 2007 is going to be softer than Q4 2006? One analyst wanted SAP to release local costs in local currencies.

To be fair, the analysts are nervous about the information technology [IT] market overall, and SAP is more likely to give out more useful detail than other IT suppliers. So there is a tendency to ask SAP questions that if answered help analysts fill in cells in overall IT market models.

But the net-net for SAP at the end of Q3 2007 is threefold. SAP said it will grow faster in 2007 than in any of the last three years. Key revenue metrics are growing at the same rate as key competitors adjusted for currency (SAP gets a negative effect from the Euro appreciation vs. the dollar whereas U.S. based competitors get an extra bump). User counts—the metric SAP wants to be measured by—continues its upward trend.

Basically, nothing has changed positive or negative since many of the same questions were asked and not answered at last week’s TechED, the announcement about acquiring Business Objects (BOBJ) a couple of weeks ago, last month’s BBD announcement, and last quarter’s conference call. So naturally the non-answers haven’t changed either. SAP would not comment on Oracle’s (ORCL) bid to acquire BEA (BEAS). In fact, it wouldn’t even comment much about SAP’s bid to acquire Business Objects.

Investors do still have to cut through SAP’s possibly misleading core enterprise applications vendor share claim as well as the statement that “we would have made more money if we weren’t rolling out BBD but we’re investing in the future.” The latter statement isn’t very actionable for investors because presumably every successful company is investing in the future. As for the former, is NetWeaver growth somehow included in SAP’s “enterprise applications” calculation? Are Netsuite and Salesforce.com (CRM) considered competitors? Still, the SAP market share claim is no more egregious than Oracle’s claim about its place in the middleware market as Oracle defines it.

In both cases, the companies do not release the numbers needed to verify the claims. So ignore them. Do not invest in SAP simply because you think it is gaining ERP market share; it is not gaining share in ERP vs. Microsoft (MSFT) and Oracle.

But the rest of the news is that there was no new news.