Thursday, January 31, 2008 / Companies / IT - SAP confident of software sales / Companies / IT - SAP confident of software sales

SAP confident of software sales
By Gerrit Wiesmann in Frankfurt

Published: January 31 2008 02:13 | Last updated: January 31 2008 02:13

SAP, the German business software manufacturer, expects that it, and many rivals, will avoid any serious fallout from the economic slowdown rippling in the wake of months of global financial turmoil.

Investors have grown increasingly worried that economic woes will lead companies to cut spending on software and computers, much as they did in 2002 when technology stocks went into tailspin.

However, Henning Kagermann, SAP chief executive, said his company had canvassed clients and concluded that demand for software that manages inventories and client data would remain strong.

“Software like ours is always in demand – in a boom because companies want to sell more, and in difficult phases because they’re looking to improve productivity,” he told the Financial Times.

It would be “absurd” to compare the current situation with that of 2002, when companies were forced to cut “exaggerated IT spending”, fed by the technology boom, at a speed that hurt software houses.

“The companies learned their lessons and became more careful with [information technology] spending,” said Mr Kagermann. “So I don’t think they’ll be forced to hit the brakes a second time.”

SAP said its operating margin would edge higher to 27.5-28 per cent this year, from 27.3 per cent in 2007, after being adjusted for writedowns and charges that accrued in the course of a big acquisition.

The company also said sales of its software and related services would grow by 12-14 per cent this year, when adjusted for currency moves, the same target set last year – which it beat by three points.

The projected slowing of growth comes as SAP integrates Business Objects, a software house it bought for €4.8bn ($7.1bn) last year, and introduces a new web-based product for small companies to market.

The projects are meant to reduce SAP’s dependency on selling software to the world’s largest corporations.

Mr Kagermann said that he would make a decision in spring or summer about whether he would extend his contract beyond early 2009.
Copyright The Financial Times Limited 2008

Friday, January 18, 2008

Oracle Buys BEA to Strengthen Position in Middleware Market

Oracle Buys BEA to Strengthen Position in Middleware Market

BEA Systems has agreed to be purchased by Oracle. If the deal gets the right shareholder and government approvals, Oracle will emerge as a peer to IBM and Microsoft, the current middleware market leaders.

Thursday, January 17, 2008 / Companies / IT - Oracle acquires BEA for $8.5bn / Companies / IT - Oracle acquires BEA for $8.5bn

Oracle acquires BEA for $8.5bn
By Richard Waters in San Francisco

Published: January 17 2008 02:27 | Last updated: January 17 2008 02:27

Oracle led a fresh round of consolidation in the software industry on Wednesday as it pulled off the $8.5bn purchase of BEA Systems, a middleware company it has stalked since last summer.

Meanwhile, Sun Microsystems picked up one of Europe’s most closely watched young tech companies – open source database company MySQL – for $1bn, and SAP announced it had sealed enough support to close its €4.8bn ($7bn) purchase of Business Objects.

Oracle won over BEA’s board as it raised its offer for the company by 14 per cent to $19.375 a share. The move echoed a pattern also seen with its purchase of PeopleSoft, the landmark deal that triggered wider software consolidation, when Oracle eventually paid considerably more than it originally offered, in spite of threats to reduce the value of its offer.

While lower than the $21 a share that BEA’s board had said it wanted, the final price still represents a partial victory for Alfred Chuang, BEA chief executive.

Oracle’s decision to go public with its interest in BEA, a company it had pursued off and on for years, came after shareholder activist Carl Icahn had taken a stake in BEA and called for a sale of the business.

Since signing a confidentiality agreement with BEA that gave him access to internal company data, however, Mr Icahn has been largely silent, giving the company time to regroup and present a stronger case to Wall Street about its efforts to turn its business around.

The acquisition will put Oracle almost neck-and-neck with IBM in terms of its middleware, a layer of software in complex corporate IT systems that has become increasingly important amid the rise of the internet, said Ian Finlay, an analyst at AMR.

Also, with a presence in application software that IBM does not have, and a stronger middleware business than SAP, Oracle is now the only company other than Microsoft able to sell a full “stack” of software to corporate customers, he added. Meanwhile, Sun’s acquisition of MySQL marks the latest attempt to kick-start a software business that has frequently failed to live up to the company’s hopes. Jonathan Schwartz, Sun CEO, said his company would be able to sell other software and services around MySQL’s products.

Started by two Swedes and a Finn, MySQL has been the most successful of a number of open source database companies that have tried to challenge a market dominated by Oracle, IBM and Microsoft.

Marten Mickos, its CEO, is fond of saying that by distributing its software free of charge and selling service and support, his aim has been to reduce the size of the global database market by a third, and take a third of what was left.

Mr Schwartz said that MySQL had revenues last year of $70m, an increase of 50 per cent from the year before, and that he planned to continue its disruptive business model.

Additional reporting by Maija Palmer in London
Copyright The Financial Times Limited 2008

Tuesday, January 15, 2008 / Companies / IT - Strong holiday sales lift SAP shares / Companies / IT - Strong holiday sales lift SAP shares

Strong holiday sales lift SAP shares
By Gerrit Wiesmann in Frankfurt

Published: January 15 2008 01:19 | Last updated: January 15 2008 01:19

German business-software company SAP said preliminary results showed strong sales in the Christmas quarter, lifting full-year growth of a key performance indicator above a previous forecast.

The announcement cheered investors, who have worried the credit squeeze could damp economic growth and corporate spending on software that runs inventories or client data.

The Walldorf-based company said sales of software and related services rose 13 per cent to €2.48bn ($3.69bn) in the fourth quarter and would have risen 17 per cent had exchange rates stayed stable.

Full-year sales of software and services rose at the same rate to €7.44bn, beating a forecast by SAP executives that sales would grow 12-14 per cent, expressed in constant currencies.

The world’s largest business software manufacturer last year introduced web-based programmes to lure small companies as sales of conventional software to global corporations slowed.

In consequence, SAP has shifted to calibrating its performance through revenues from software and services, rather than software alone – although even this older measure was strong.

Software sales, long seen as an indicator of follow-on maintenance revenues, rose 14 per cent – or 18 per cent at constant currencies – to €1.4bn in October, November and December.

This figure, slightly above analysts’ forecasts, helped push SAP shares on Monday to €33.70, 2.7 per cent higher than Friday’s close – although still below a high of €41.76 seen in September.

The company in October took investors by surprise when it announced the takeover of Business Objects, a business analytics company, for €4.8bn, SAP’s first big acquisition.

The move rattled investors just as they were starting to regain confidence in the company after a January announcement that its web-based service for small companies would reduce profitability in 2007.

SAP said on Monday its operating margin would, as forecast a year ago, fall to 26.5 per cent from 27.3 in 2006, with the dollar’s slide against the euro lobbing 0.3 points off profitability.

The company plans to release detailed results and give a forecast for this year on 30 January.

This week, it will give more details about the integration of Business Objects.
Copyright The Financial Times Limited 2008

Monday, January 07, 2008

i2: Think Services Play, not Software Vendor

i2: Think Services Play, not Software Vendor

About a year ago, I wrote about my meeting with Azim Premji, Wipro’s chairman. One of the first topics we covered was the relatively modest number of new customers added each quarter by the fast-growing Indian services firms.

Mr. Premji responded by saying that his number reflects “net new customers,” or new business minus the closed accounts. At the time, Wipro had added 37 new accounts for the quarter ending December 31, 2006. Then he said something surprising: “I’d like to get that number to zero.” He said that chasing new business was very expensive and time consuming, and that there is no guarantee of a long-term relationship. He said that Wipro’s strategy is to focus on “must-have accounts.” Other Indian services firms have expressed similar opinions.

i2 becoming more like Wipro?

A few weeks ago, I met with a group of i2 Technologies executives, including Dr. Pallab Chatterjee, the interim CEO. During our briefing, I mentioned Mr. Premji’s comments to the i2 team. Dr. Chatterjee said that he was following a very similar strategy and is shifting i2 to a more intensive focus on serving the existing customer base with an expanded set of software and services. He then described some hosting projects as well as planning and fulfillment outsourcing.

We talked about how i2’s business had changed in the nearly 20 years that I have been following the firm. In the past, i2 often embarked on multiyear transformational projects. The customer would spend a year deciding on a vendor, then use another year or longer to complete the software implementation, and then use a third year (or more) to begin to achieve results.

Customers are no longer willing to wait three years for results. In my meetings with i2 executives, they are confident that they can compress the results cycle to a much shorter time period by focusing on a well-defined set of critical success processes, including “making plans happen,” “lean replenishment,” “supply continuity,” “deliver-to-order,” “matching consumer demand,” and “product profitability.” Each process is modeled after the total quality management (TQM) methodology and has a well-known customer as sponsor.

i2 has about 500 active customers (defined as paying maintenance). To serve the largest customers, i2 has formed 100 customer business units. The list includes companies that have worked with i2 for more than 10 years. The shift to more of a focus on services has been happening since the start of this decade, and can be seen in the company’s financial results. When i2 reported its 3Q07 results November 1, revenue from services and maintenance accounted for 50.2% and 34.0%, respectively, of the $66.5M reported in total revenue.

Will the new strategy makes i2 attractive to services vendors?

Dr. Chatterjee and team don’t have a lot of time to make the new strategy work; investors have been pressuring them to find a buyer for the company. They have to show that they can grow revenue and their market valuation. As I write this, i2’s market cap hovers around $266M. This is about the same as the revenue that the company expects to report for the fiscal year ending December 31, 2007.

The logical list of potential buyers or partners could include any of the major services vendors. Accenture was a key services partner during i2’s rapid growth phase. A deal with i2 could help build its nascent supply chain outsourcing process. IBM has been a customer and a partner. IBM executives will tell you that i2’s demand planning implementation at IBM’s PC division was the most successful supply chain project ever completed at the company. Tata Consultancy Services (TCS), also a long time i2 partner, has been the most aggressive of the Indian services firms in building a supply chain practice. Other firms, like Infosys, Satyam, and Wipro, may be interested in challenging TCS here.

What do you think?

Can software vendors make the transition to a more services-based business? Does i2 have time to make the transition, or will it be forced to sell or wage a messy battle with investors? Are the services vendors the logical suitors, or should JDA Software, Oracle, or SAP step in as partner or suitor?

As always, I welcome your feedback and ideas—

Friday, January 04, 2008

The AMR Research Supply Chain Top 25 Blows Away Market with 17.89% Return | AMR Research

The AMR Research Supply Chain Top 25 Blows Away Market with 17.89% Return | AMR Research

For the third year in a row, the Supply Chain Top 25 portfolio of companies outperformed the market, this time by a wide margin. The average total return of the Top 25 portfolio for 2007 is 17.89%, compared with returns of 6.43% for the Dow Jones Industrial Average (DJIA) and 3.53% for the S&P 500. Clearly, this is a group of companies that excels, strongly weathering the ups and downs we’ve seen in the market this year.