SAP AG in pursuit of annual cloud sales estimated to 1 billion Euro

SAP AG continues to try booking more than 1 billion Euro in annual cloud sales. The company is currently pushing the transition from providing on-premise business software to allowing customers to rent software via the web. SAP booked 758 million Euro in sales from cloud subscriptions and support in 2013. According to some preliminary figures published on Friday, these results exceeded the companys full-year guidance of 750 million Euro and even more than doubled the numbers from 2012.

The company announced that the 12-month run rate for its cloud business is now estimated to 1.06 billion Euro, based on the fourth-quarter total. There are still difficulties for the company, mainly associated with the stronger Euro and weaker yen, something of which SAP warned about last October. This was the reason for a 5% reduction in the fourth-quarter revenue growth.

SAPs total sales, including currency translation effects, rose to 5.1 billion Euro in the fourth quarter, 1% more compared with the same 3-month period in 2012. In addition, the fourth-quarter operating profit of the company, excluding currency swings and some items, increased to 2.09 billion Euro. This is 14% more in comparison to the consensus forecast of 2.1 billion Euro, which Bloomberg analysts compiled.

One of the key issues that stand before SAP AG is whether the company will manage to grow its cloud business without making any sacrifices or compromises with the high margins and sales associated with its main physical software business. The company is currently engaged in enterprise applications in terms of software and software-related service revenue. The major part of SAPs business is focused on selling licenses for software solutions and related services to its customers.

Co-Chief Executive Officers of SAP AG – Bill McDermott and Jim Hagemann Snabe, explained that the company is “one of the few global tech companies that has successfully managed the transition to the cloud whilst growing our core business and improving our profitability at the same time”.

According to the Financial Times, the current share price of SAP AG is 1.54% down, and its one-year return rate is up by 0.25%. The 53 analysts offering 12 month price targets for SAP AG have a median target of 65.00, with a high estimate of 90.00 and a low estimate of 45.00. The median estimate represents a +5.26% increase from the last price of 61.75.