SAP’s lower profit guidance blamed on “tough” cloud transition

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SAP, like its enterprise software competitors, has been talking cloud for years, putting a ton of effort into promoting HANA as a cloud-enabled in-memory database for example.

But early Tuesday, a preliminary earnings report for its fourth quarter 2014 had analysts wondering about just how well it’s executing on the tricky balancing act between on-premises enterprise software sales — with big up-front payments and high maintenance fees — and the more incremental sales model of cloud technologies.

In this game, SAP is competing not only with long-time rivals like [company]Oracle[/company], but newer-look (but not really all that new) companies like [company]NetSuite[/company] and [company]Salesforce.com[/company] that offer enterprise applications in the software-as-a-service model. SAP has had a couple of hiccups in that market

On Tuesday, the Walldorf, Germany-based software giant said it now expects operating profit for fiscal 2017 to come in at about $7.3 billion, on revenue of about $24.3 billion,  down from previous guidance of $7.7 billion. Coming as it did after another profit warning four months ago, Wall Street got restless and SAP shares fell 5.09 percent to $63.71 in pre-market-open trading

Bloomberg News summed up the problem: [company]SAP[/company] revenue from cloud subscription and support will reach $2.26 billion to $2.35 billion this year, but analysts surveyed by the publication had expected them to come in at around $2.41 billion range.

To all of this SAP CEO Bill McDermott took to CNBC to say (paraphrasing here) that the company’s core business is growing, its cloud business is growing faster, so there’s nothing to worry about.

SAP, like rivals Oracle and other legacy enterprise software players, have to convince customers that they truly “get” cloud, or at least SaaS.

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