SAP is one ERP player that has successfully adapted itself to the changing market landscape. After proving its mettle within the Cloud/Big Data market with HANA, the company is now gearing up to target the Internet of Things (IoT) segment.
SAP’s third quarter revenues grew 8% over the year to €5.4 billion (~$5.9 billion) compared with the market’s forecast of €5.3 billion (~$5.8 billion). Operating profits came in at €1.64 billion (~$1.79 billion), falling short of the market consensus of €1.65 billion (~$1.8 billion). Adjusted EPS of $1.02 also was short of the Street’s forecast of $1.05 for the quarter.
By segment, revenues from Services were up 6.6% to €920 million (~$1 billion). Cloud and Software business, which includes Cloud Subscriptions and Support and Software licenses and support, grew 8% over the year to €4.5 billion (~$4.9 billion). Within the segment, Cloud Subscriptions and Support revenues grew 28% to €769 million (~$857.9 million), while Software licenses and support reported revenues grew 4.6% to €3.7 billion (~$4.1 billion). By region, revenues from the Cloud and software segment grew 8% in Europe, the Middle East and Africa, 9% in the Americas, and 8% in Asia Pacific.
For the current year, SAP increased the outlook for earnings to €6.5 billion-€6.7 billion (~$7.1-$7.3 billion).
SAP’s IoT Growth
According to a recent report by Machina Research, the total number of IoT connections are estimated to grow 16% annually over the next 10-year period from 6 billion in 2015 to 27 billion in 2025. Total IoT revenue opportunity is projected to grow to $3 trillion in 2025 from $750 billion in 2015. Given the market opportunity, SAP is increasing its focus on the segment. Last month, it announced plans to invest $2.25 billion in the development of its IoT offerings.
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